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In: Finance

It is the beginning of January. Actual sales for the previous quarter (Q4) and estimated sales...

It is the beginning of January. Actual sales for the previous quarter (Q4) and estimated sales for the next five quarters are as follows (in $ million):

Quarter Q4 Q1 Q2 Q3 Q4 Q1
Sales 24 25.2 26.46 27.78 29.17 30.63

You collect 20% of sales in the current quarter and the remainder in the following quarter. You expect to spend 40% of the following quarter's sales on purchases of components from suppliers, and to pay 70% of those purchases in the current quarter and the remainder in the following quarter. Wages and other expenses add up to 30% of each quarter's sales.

You have to pay $4 million in interest and dividends each quarter, and plan to spend $7 million on new machinery in Q3.

Assume that each quarter has 90 days, sales occur evenly throughout the quarter and all other cash flows occur at the end of the quarter.

1. What is your expected net cash flow in Q1 (in $ million)?

2. What is your expected net cash flow in Q2 (in $ million)?

3. What is your expected net cash flow in Q3 (in $ million)?

4. What is your expected net cash flow in Q4 (in $ million)?

Solutions

Expert Solution

AS ROUNDING CONDITION IS NOT MENTIONED, IT IS ROUNDED TILL 4 DECIMALS, ANY CHANGE NEEDED, LET ME KNOW. HAPPY TO HELP YOU. THANK YOU

jeff jeffy answered 14 hours ago
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