Big Chuck wants to maintain a $10,000 minimum cash balance at all times. Additional financing is available (and retired) in $1,000 multiples at a 12% interest
Abbreviated cash budget; financing emphasis
An abbreviated cash budget for Big Chuck Enterprises follows:
July August September
Beginning cash balance $ 10,000 $ ? $ ?
Add: Cash receipts 50,000 63,000 71,000
Deduct: Cash payments (64,000) (58,000) (64,000)
Cash excess (deficiency)
before financing $(4,000) $? $?
Financing
Borrowing to maintain
minimum balance ? ? ?
Principal repayment ? ? ?
Interest payment ? ? ?
Ending cash balance $? $? $?
Big Chuck wants to maintain a $10,000 minimum cash balance at all times. Additional financing is available (and retired) in $1,000 multiples at a 12% interest rate. Assume that borrowings take place at the beginning of the month; retirements, in contrast, occur at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid.
a Find the unknowns in Big Chuck’s abbreviated cash budget.
b Determine the outstanding loan balance as of September 30, after any repayments have been made.
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