Mooney Equipment is putting together its cash budget for the following year and has forecasted expected cash collections over the next five quarters (one year plus the quarter of the next year). The cash collection estimates are based on sales projections and expected collection of receivables. The sales and cash collection estimates are shown in the following table (in millions):
Q1 Q2 Q3 Q4 Q5
Sales: 1,100 1,400 1,450 1,250 1,500
Total Cash collections 1,100 1,150 1,200 1,200
You also have the following information about Mooney equipment:
In any given period, Mooney’s purchases from suppliers generally account for 72% of the expected sales in the next period, and wages, supplies, and taxes are expected to be 15% of next periods sales
In the third quarter, Mooney expects to expand one of its plants, which will require an additional $1072 million investment
Every quarter, Mooney pays $55 million in interest and dividend payments to long term debt and equity investors
Mooney prefers to keep a minimum target cash balance of at least $14 million at all times.
Using the proceeding information answer the following questions:
What is the net cash inflow that Mooney expects in the Second Quarter (Q2)?
If Mooney is beginning this year with a cash balance of $36 million and expects to maintain a minimum target cash balance of at least $14 million, what will be its likely cash balance at the end of the year (after Q4)?
What is the maximum investable funds that the firm expects to have in the next year?
What is the largest cash deficit that the firm expects to suffer in the next year?