Part A – The Hunter Company Cash Budgeting Scenario Use the following bulleted information


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Part A – The Hunter Company Cash Budgeting Scenario Use the following bulleted information to complete Steps 1 and 2 below: The Hunter Company’s cash balance at June 01 is $2,000,000. Sales are made 80% on Accounts receivable and 20% for cash. Of Cash payments of $3,000,000 are made for salaries and wages ea Items are purchased for resale at 50% of the sales price. For exam Purchases of inventory are made 100% on Accounts payable. Acco Note: The starting point of a cash budget is the forecasted sales for the budget. All else depends on this. 1. Prepare a cash budget for each of the three months of June, July 2. If the Hunter Company has a loan payment of $15,000,000 due Part B – Acme Company Capital Budgeting Scenario The Acme Company is considering investing a total of $30,000,000 in a new production line utilizing more robots The expected cost savings are $5,000,000 a year starting this year and continuing for the next nine years, for a The Acme Company requires a return on investment of 12% per year, before income taxes. Directions Complete the following questions: 1. 2. 3. 4. Do you recommend that Acme Company make this investment? Why is the net present value approach to capital budgeting pre What is the definition on the internal rate of return (IRR)? The IR What is the approximate rate of return on an investment that co ne 01 is $2,000,000. le and 20% for cash. Of the 80% made on Accounts receivable, 30% are collected in the month of sale, and 70% or salaries and wages each month, and cash payments of $2,000,000 are made for other items each month. he sales price. For example, it took $10,000,000 in purchases of inventory in May to support the $20,000,000 in Accounts payable. Accounts payable are paid 10% in the month of purchase and 90% in the month after purcha se depends on this. hree months of June, July and August. ent of $15,000,000 due on September 1st, will they have the cash to make this loan payment? What options do n line utilizing more robots than the existing line, which will result in savings in the cost of labor. The cash outlays expected the next nine years, for a total of ten years. The Acme Company is not comfortable with estimating cost savings more than y make this investment? Base your answer on the expected net present value of the investment. Show all of you o capital budgeting preferred over the payback period approach to capital budgeting? te of return (IRR)? The IRR for this investment cannot be calculated. Why not? on an investment that costs $400,000 and returns $50,000 a year for ten years? Show or explain how you calcul month of sale, and 70% are collected in the month after sale. Sales in May were $20,000,000. Expected sales f r items each month. port the $20,000,000 in sales made in May. The company has a policy of maintaining inventory at a constant $5 n the month after purchase. yment? What options does the company have if they want to maintain a cash balance of $2,000,000? What are The cash outlays expected for the new production line are: $20,000,000 now and another $10,000,000 in one year from to ing cost savings more than ten years into the future, so it is assumed there are no cost savings beyond ten years and that estment. Show all of your work. Use present value tables available online or in many books to calculate the net r explain how you calculated this 00,000. Expected sales for June are $25,000,000, expected sales for July are $26,000,000, and expected sales fo ventory at a constant $5,000,000. Accordingly, there was $5,000,000 of inventory on hand on June 01. $2,000,000? What are the implications of these options? 00,000 in one year from today. eyond ten years and that there is no resale value of the equipment and robots after ten years. oks to calculate the net present value so that your work

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