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# Sam's Inc., has estimated sales (in millions) for the next four quarters as follows:

Sam's Inc., has estimated sales (in millions) for the next four quarters as follows:

Q1 Q2 Q3 Q4

Sales$140 $160 $180 $210

Sales for the first quarter of the year after this one are projected at $155 million. Accounts receivable at the beginning of the year were $61 million. Sam has a 45-day collection period.

Sam's purchases from suppliers in a quarter are equal to 45 percent of the next quarter's forecast sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 25 percent of sales. Interest and dividends are $10 million per quarter.

Sam's plans a major capital outlay in the second quarter of $76 million. Finally, the company started the year with a $73 million cash balance and wishes to maintain a $40 million minimum balance.

a-1.Assume that Sam's can borrow any needed funds on a short-term basis at a rate of 3 percent per quarter and can invest any excess funds in short-term marketable securities at a rate of 2 percent per quarter. Complete the following short-term financial plan for Sam. (Enter your answers in millions. A negative answer should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

SAM, INC.

Short-Term Financial Plan

(in millions)

Q1Q2Q3Q4

Target cash balance$40.00 $40.00 $40.00 $40.00

Net cash inflow$$$$

New short-term investments$$$$

Income on short-term investments$$$$

Short-term investments sold$$$$

New short-term borrowing$$$$

Interest on short-term borrowing$$$$

Short-term borrowing repaid$$$$

Minimum cash balance$$$$

Ending cash balance$$$$

Cumulative surplus (deficit)$$$$

Beginning short-term investments$$$$

Beginning short-term debt$$$$

Ending short-term investments$$$$

Ending short-term debt$$$

a-2.What is the net cash cost for the year under this target cash balance? (A negative answer should be indicated by a minus sign. Enter your answer in millions. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Net cash cost $

b-1.Complete the following short-term financial plan assuming that Sam maintains a minimum cash balance of $20 million. (Enter your answers in millions. A negative answer should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

SAM, INC.

Short-Term Financial Plan

(in millions)

Q1Q2Q3Q4

Target cash balance$20.00 $20.00 $20.00 $20.00

Net cash inflow$$$$

New short-term investments$$$$

Income on short-term investments$$$$

Short-term investments sold$$$$

New short-term borrowing$$$$

Interest on short-term borrowing$$$$

Short-term borrowing repaid$$$$

Ending cash balance$$$$

Cumulative surplus (deficit)$$$$

Beginning short-term investments$$$$

Beginning short-term debt$$$$

Ending short-term investments$$$$

Minimum cash balance$$$$

Ending short-term debt$$$$

b-2.What is the net cash cost for the year under this target cash balance? (Enter your answer in millions. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Net cash cost $