Chapter 18

Problems 1-18
Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak" and "Solver Add-In."

sis ToolPak"

Chapter 18
Question 1 Input Area:

Increase Decrease No change

I D N

Output Area:

a. b. c. d. e. f. g. h. i. j. k. l. m. n. o.

N N N D D D N D I D D N D D I

Chapter 18
Question 2 Input Area:

Book net worth Long-term debt NWC other than cash Fixed assets Current liabilities

$ $ $ $ $

10,380 7,500 2,105 15,190 1,450

Output Area:

Total L&E Cash NWC Current assets

$ $ $ $

19,330 2,035 4,140 5,590

Chapter 18
Question 3 Input Area:

Increase Decrease No change

I D N

Output Area:

a. b. c. d. e. f.

I I D N D N

Chapter 18
Question 4 Input Area:

Increase Decrease No change

I D N

Output Area:

a. b. c. d. e. f.

Cash Cycle I I D D D I

Operating Cycle I N D D N I

Chapter 18
Question 5 Input Area:

Beginning A/R a. Collection period b. Collection period c. Collection period Sales

360 45 60 30 Q1 Q2 790 $ 740 $ Q3 870 $ Q4 950

Output Area:

a.

45 -day collection period Q1 Beginning receivables $ 360.00 $ Sales $ 790.00 $ Cash collections $ (755.00) $ Ending receivables $ 395.00 $ 60 -day collection period Beginning receivables $ 360.00 $ Sales $ 790.00 $ Cash collections $ (623.33) $ Ending receivables $ 526.67 $ 30 -day collection period Beginning receivables $ 360.00 $ Sales $ 790.00 $ Cash collections $ (886.67) $ Ending receivables $ 263.33 $

Q2 395.00 740.00 (765.00) 370.00

$ $ $ $

Q3 370.00 870.00 (805.00) 435.00

$ $ $ $

Q4 435.00 950.00 (910.00) 475.00

b.

526.67 740.00 (773.33) 493.33

$ $ $ $

493.33 870.00 (783.33) 580.00

$ $ $ $

580.00 950.00 (896.67) 633.33

c.

263.33 740.00 (756.67) 246.67

$ $ $ $

246.67 870.00 (826.67) 290.00

$ $ $ $

290.00 950.00 (923.33) 316.67

Chapter 18
Question 6 Input Area:

Item Inventory A/R A/P Net sales COGS

Beginning $ 9,780 $ 4,108 $ 7,636 $ 89,804 $ 56,384

$ $ $

Ending 11,380 4,938 7,927

Output Area:

Inventory turnover Inventory Period Receivable turnover Receivable period Operating cycle Payables turnover Payables period Cash cycle

5.3293 68.4893 19.8550 18.3833 86.87 7.2459 50.3733 36.50

Chapter 18
Question 7 Input Area:

Collection period Discount

32 1.50%

Output Area:

Preiods in a year EAR

11.4063 18.81%

Chapter 18
Question 8 Input Area:

Projected sales increase Orders (% of sales) b. Payables period c. Payables period Q1 Sales $

15% 30% 90 60 Q2 820 $ 860 $ Q3 930

Output Area:

a, The payable period is zero since payment is made immediately. Payment in each period = 0.30 times next period sales Q1 Q2 Payment of accounts $ 258.00 $ 279.00 $ b. If the payables period is Payment of accounts c. If the payables period is Payment of account 90 days. 246.00 $ 60 days. 250.00 $

Q3 297.00

258.00

279.00

265.00

285.00

Q4 $ 990

Q4 282.90

297.00

292.30

Chapter 18
Question 9 Input Area:

Purchases (% of sales) Payables period Expenses (% of sales) Interest & dividends per Q Projected sales Q(1) next year Sales

$ $ Q1 $

75% 60 days 20% 90 1,090 Q2 980 $ 930

Output Area:

With a payables period of

60 Q1 722.50 196.00 90.00 1,008.50

days. Q2 732.50 186.00 90.00 1,008.50

Payment of accounts Wages, taxes, other expenses Long-term financing expenses Total

Q3 1,070

Q4 $ 1,250

Q3 847.50 214.00 90.00 1,151.50

Q4 897.50 250.00 90.00 1,237.50

Chapter 18
Question 10 Input Area:

Sales budget Credit sales: In the month of the sale In the month of after the sale In the second month after the sale A/R balance at the end of previous Q December uncollected sales

January 235,000

February 260,000

March 295,000

65% 20% 15% $ $ 173,000 136,000

Output Area:

a. November sales b. December sales c. January collections Febuary collections March collections

$ $ $ $ $

246,666.67 388,571.43 267,464.29 274,285.71 279,000.00

Chapter 18
Question 11 Input Area:

Credit sales Credit purchases Cash disbursements Wages, taxes, and expenses Interest Equipment purchases Uncollected credit sales Collected in the month of the sale Collected in the following month Previous month credit sales Previous month credit purchases Beginning cash

April 390,000 147,800 53,800 13,100 87,000 5% 35% 60% 245,000 168,000 140,000

May 364,000 176,300 51,000 13,100 147,000

June 438,000 208,500 78,300 13,100 -

$ $ $

Output Area:

Sales collections = .35 times current month sales + .60 times previous month sales. April 140,000 283,500 423,500 168,000 53,800 13,100 87,000 321,900 101,600 May 101,600 361,400 463,000 147,800 51,000 13,100 147,000 358,900 104,100 June 104,100 371,700 475,800 176,300 78,300 13,100 267,700 208,100

Beginning cash balance Cash receipts Cash collections from credit sales Total cash available Cash disbursements Purchases Wages, taxes, and expenses Interest Equipment purchases Total cash disbursements Ending cash balance

$ $

$ $

$ $

$ $

$ $

$ $

Chapter 18
Problem 12 Input area:

Balance Sheet (in $ thousands) 2007 2008 Assets Cash Accounts receivable Inventories Property, plant, and equipment Less: Accumulated depreciation Total assets $ 38,000 87,380 76,000 183,760 57,160 327,980 $ 36,900 91,680 79,670 196,480 65,350 339,380

Output area:

Cash Accounts receivable Inventories Property, plant, and equipment Accounts payable Accrued expenses Long-term debt Common stock Accumulated retained earnings

Source Use Use Use Source Use Source Source Source

$ $ $ $ $ $ $ $ $

1,100 (4,300) (3,670) (12,720) 2,600 (810) 3,000 5,000 1,610

Sheet (in $ thousands) 2007 Liabilities and Equity Accounts payable Accrued expenses Long-term debt Common stock Accumulated retained earnings Total liabilities and equity $ 56,300 7,850 32,000 20,000 211,830 327,980 $ 2008 58,900 7,040 35,000 25,000 213,440 339,380

$ $

$ $

Chapter 18
Question 13 Input Area:

Line of credit Interest rate Compensating balance b. Amount borrowed Months to repay

50,000,000 0.640% 5% 15,000,000 6

Output Area:

a. Compensating balance amount Monthly interest amount Amount you can use Periodic rate EAR b. Amount to borrow Total interest paid

$ $ $

2,500,000 320,000 47,500,000 0.6737% 8.39%

$ 15,789,473.68 $ 616,100.02

Chapter 18
Question 14 Input Area:

Line of credit Interest rate per quarter Compensating balance Bank pays b. Amount borrowed Months to repay Compounding periods/year

70,000,000 2.300% 4.00% 1.20% 45,000,000 12 4

Output Area:

a. EAR b. Opportunity cost Interest cost Total interest EAR c. Interest cost EAR

4.89% $ 48,870.93 $ 4,285,032.65 $ 4,333,903.59 9.63% $ 6,665,606.35 9.52%

Chapter 18
Questions 15, 16 Input Area:

Q1 Sales (in millions) Sales (1st quarter of next year) A/R Collection period % of purchases for next Q sales Suppliers paid % of sales for expenses Interest and dividends Outlay in second Q Beginning cash balance Minimum balance (in millions) Borrowing rate Invested securities Beginning short-term borrowing $ $ $ 210 240 68 45 45% 36 25% 12 80 64 30 3% 2% $

Q2 180 $

Q3 245 $

Q4 280

$ $ $ $

Output Area:

45-day collection period means sales collectiond = 1/2 current sales + 1/2 old sales 36-day payables period means payables = 3/5 current orders + 2/5 old orders Q1: Cash flow $ 40.50 Q2: Cash flow $ (40.55) Q3: Cash flow $ 19.55 Q4: Cash flow $ 65.30 Beginning receivables Sales Collection of accounts Ending receivables Payment of accounts Wages, taxes, and other expenses Capital expenditures Interest & dividends Total cash disbursements Total cash collections Total cash disbursements Net cash inflow $ 68.00 210.00 173.00 105.00 86.40 52.50 12.00 150.90 173.00 150.90 22.10 $ 105.00 180.00 195.00 90.00 98.55 45.00 80.00 12.00 235.55 $ 90.00 245.00 212.50 122.50 119.70 61.25 12.00 192.95 212.50 192.95 19.55 $ 122.50 280.00 262.50 140.00 115.20 70.00 12.00 197.20 262.50 197.20 65.30

$ $

$ $

$ $

$ $

$ $ $

$ $ $

$ $ $

195.00 $ 235.55 (40.55) $

Beginning cash balance Net cash inflow Ending cash balance Minimum cash balance Cumulative surplus (deficit)

$ $ $

Cash Balance Q1 64.00 $ 22.10 86.10 $ (30.00) 56.10 $

Q2 86.10 $ (40.55) 45.55 $ (30.00) 15.55 $

Q3 45.55 $ 19.55 65.10 $ (30.00) 35.10 $

Q4 65.10 65.30 130.40 (30.00) 100.40

Target cash balance 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

Short-term Financial Plan 30.00 $ 22.10 (22.78) 0.68 $ 30.00 $ $

30.00 $ (40.55) 1.14 39.41 30.00 $

30.00 $ 19.55 (19.90) 0.35 30.00 $

30.00 65.30 (65.70) 0.40 30.00

Minimum cash balance Cumulative surplus (deficit) Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt Q1: Q2: Q3: Q4: excess funds at start of quarter of excess funds at start of quarter of excess funds at start of quarter of excess funds at start of quarter of Net cash cost Q1 Q2 Q3 Q4 Cash generated by short-term financing

$ $ $ $ $

(30.00) 34.00 56.78 $34.00 $56.78 $17.37 $19.90

$ $ $ $ $

(30.00) $ 56.78 17.37 earns earns earns earns $ $ $ $

(30.00) $ 19.90 $0.68 $1.14 $0.35 $0.40 $ $ $ $ in income. in income. in income. in income.

(30.00) 17.37 83.46 -

$ $ $ $ $

0.68 1.14 0.35 0.40 2.56

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Question 17 Input Area:

Line of credit % for borrowing Compensating balance Commitment fee Compounding periods/year b. Used credit

400,000,000 1.90% 4% 0.140% 4 130,000,000

Output Area:

a. For every dollar borrowed, you pay $0.019 in interest interest and get to use $0.960 EAR 8.145% b. Interest paid Amount received EAR $ 10,165,163.62 $ 124,240,000.00 8.182%

Chapter 18
Question 18 Input Area:

Interest rate Line of credit Compensating balance

10% 25,000,000 5%

Output Area:

Interest payment Compensating balance Usable funds EAR

$ $ $

2,500,000 1,250,000 21,250,000 11.76%