Construct and use a cash budget
Response to the following problem:
Dexter Communications, Inc., is preparing its cash budget for 2015. Dexter ended 2014 with cash of $68 million and managers need to keep a cash balance of at least $70 million for operations. Collections from customers are expected to total $11,325 million during 2015, and payments for the cost of services and products should reach $6,196 million. Operating expense payments are budgeted at $2,553 million.
During 2015, Dexter expects to invest $1,822 million in new equipment and sell older assets for $157 million. Debt payments scheduled for 2015 will total $538 million. The company forecasts net income of $893 million for 2015 and plans to pay dividends of $348 million. Prepare Dexter Communications' cash budget for 2015. Will the budgeted level of cash receipts leave Dexter with the desired ending cash balance of $70 million, or will the company need additional financing? If so, how much?