| Precision Machines |
| Student Note: Fill in the light yellow cells |
| Data: |
| | | November | December | January | February | March | April | May | June |
| Annual Cost of borrowing | 10.00% |
| Minimum Cash Balance | $5,000.00 |
| Beginning Cash Balance | $7,500.00 |
| Revenues (Sales) | | $40,000.00 | $50,000.00 | $48,000.00 | $55,000.00 | $35,000.00 | $50,000.00 | $65,000.00 | $40,000.00 |
| Cash Collections | | November | December | January | February | March | April | May | June |
| First Month (30%) | | $12,000.00 | $15,000.00 | $14,400.00 | $16,500.00 | $10,500.00 | $15,000.00 | $19,500.00 | $12,000.00 |
| Second Month (35%) | | | 14,000.00 | 17,500.00 | 16,800.00 | 19,250.00 | 12,250.00 | 17,500.00 | 22,750.00 |
| Third Month (35%) | | | | 14,000.00 | 17,500.00 | 16,800.00 | 19,250.00 | 12,250.00 | 17,500.00 |
| Total Collections | | $ 12,000.00 | $ 29,000.00 | $ 45,900.00 | $ 50,800.00 | $ 46,550.00 | $ 46,500.00 | $ 49,250.00 | $ 52,250.00 |
| Add Borrowings | | | | | | $8,250.0 |
| Cash Disbursements |
| Material Purchases | | | $20,000.00 | $25,000.00 | $24,000.00 | $27,500.00 | $17,500.00 | $25,000.00 | $32,500.00 |
| Salaries | | | | 6,000.00 | 6,000.00 | 6,000.00 | 6,000.00 | 6,000.00 | 6,000.00 |
| Wages | | | | 3,000.00 | 3,500.00 | 3,000.00 | 3,200.00 | 3,500.00 | 3,000.00 |
| Other Expenses |
| Capital Expenditure | | | | | | 45,000.00 |
| Dividends | | | | | | 1,000.00 | | | 1,000.00 |
| Interest | | | | | | | 68.75 |
| Total Disbursements | | | $ 20,000.00 | $ 34,000.00 | $ 33,500.00 | $82,500.00 | $ 26,768.75 | $ 34,500.00 | $ 42,500.00 |
| Cash flows |
| Net cash flows | | $ 12,000.00 | $ 9,000.00 | $ 11,900.00 | $ 17,300.00 | $ (27,700.00) | $ 19,731.25 | $ 14,750.00 | $ 9,750.00 |
| Cumulative cash flows | | $19,500.00 | $23,500.00 | $ 30,400.00 | $ 42,700.00 | $ 10,000.00 | $ 24,731.25 | $ 34,481.25 | $ 39,231.25 |
| Minimum Cash Balance | | $5,000.00 | $ 5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 |
| Cash Surplus or (Deficit) | | $14,500.00 | $18,500.00 | $ 25,400.00 | $ 37,700.00 | $ 5,000.00 | $ 19,731.25 | $ 29,481.25 | $ 34,231.25 |
| Recommendations: |
| The company in the month of March was not able to meet the minimum cash balance and therefore needed to borrow at least $8,250 in that month. |
| Therefore the result is a cash disbursment of $ 68.75 per month as the rate is annual as interest on that borrowing to enable it have the minimum cash balance of $ 5,000. |
| The company should make the payment the following month to reduce the interest expenditure. The assumption is that the interest is charged on a straight line basis. |
| Due the surplus in the month of April th ecompany should consider paying off the loan. |
Mfestoyo
case_study_team_project_week_35.xls
