Question

A company has the following budgeted information: Cash receipts: $542,000; Beginning cash balance: $10,000; Cash payments (including interest payments): $560,000; Outstanding loan balance: $100,000; Desired ending cash balance: $50,000. In order to maintain the desired cash balance, the company will need to:

Answer 1

In order to maintain the desired cash balance, the company will need to:

The company needs to take a loan of $58,000, because the cash balance is -$8,000, and the company wants to keep a ending cash balance of $50,000

Step-by-step explanation:

$10,000 Beginning Cash Balance

$542,000 Cash Receipts

-$560,000 Cash Payments

-$8,000 Cash Balance

$58,000 Loan to keep the desired ending balance.

The Outstanding loan balance is not considered because it reflects the total Present Value of remaining loan installments.