Problem
Burchfield, Inc. has prepared its third quarter budget and provided the following data: Jul Aug Sept Cash collections $49,000 $39,800 $47,700 Cash payments: Purchases of direct materials 30,000 21,800 18,000 Operating expenses 12,000 9,100 11,300 Capital expenditures 13,400 24,100 0 The cash balance on June 30 is projected to be $5,200. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash. Calculate the amount of principal repayment at the end of September.