Assignment Problem: An abbreviated cash budget for Big Chuck Enterprises follows:
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|
July
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August
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September
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Beginning cash balance
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$10,000
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$?
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$?
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|
Add: Cash receipts
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50,000
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63,000
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71,000
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|
Deduct: Cash payments
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-64,000
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-58,000
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-64,000
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Cash excess (deficiency) before financing
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($4,000)
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$?
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$?
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Financing Borrowing to maintain minimum balance
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?
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?
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?
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|
Principal repayment
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?
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?
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?
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|
Interest payment
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?
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?
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?
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|
Ending cash balance
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$?
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$?
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$?
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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.
Required:
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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