Reasons for holding cash and the need for cash budgeting
Not what you're looking for?
I. Winner Where She Goes, Inc. is considering an investment of $800,000 in a new equipment line for boning and packaging beef products. The equipment has an expected life of 5 years. Sales are expected to be 900,000 units per year, at a price of $3 per unit. Fixed costs excluding depreciation are $300,000 per year, and variable costs are $1.80 per unit. The equipment will be depreciated over 5 years using the straight line method with a salvage value of zero. The corporation pays income tax at a rate of 34%.
Find out:
a) Total costs
b) Total Revenues
c) Operation Profit (EBIT)
d) Net income after tax and interest.
e) Break-Even Units and dollars (Hint: BE (Units)= Fixed cost/price per unit - variable cost per unit)
II. Every organization knows the significant of a cash budget and how it can determine the future business.
Analyze the reasons for holding cash and underlie the need for cash budgeting. Discuss these questions:
a) What information is needed to prepare a cash budget?
b) What is the relationship between an operating and a cash budget?
c) Why is it important for an organization to prepare a cash budget?
Purchase this Solution
Solution Summary
The total costs, total revenues, operation profits, net income and break even units are calculated.
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.