Reference no: EM132595809

Suppose we must prepare the cash budget of a commercial company (company dedicated to the purchase and sale of products) for the period of 4 Years; the data we have are the following:

1. Sales of 300 units are forecast for year 1 and a 10% increase from year 2.

2. The sale price is 60,000 pesos per unit.

3. The collection of sales is made 100% in cash.

4. Merchandise purchases of 310 units are forecast for Year 1 and an increase of 10% from Year 2.

5. The purchase price is 25,000 pesos per unit.

6. Expenses for administrative staff remuneration, rents, insurance and services are estimated at 4,000,000 fixed annual pesos (administrative expenses).

7. Estimated expenses for remuneration of sales staff, commissions, promotion and advertising for 2,000,000 annual fixed pesos (sales expenses).

8. A loan for 20 million pesos is obtained, which must be paid from Year 1 in constant amortizations of 2,000,000 pesos and interest of 300,000 fixed pesos.

9. The tax payment is 2% of cash sales.

Question 1: Prepare, the projected budget or cash flow for the next 4 years and prepare a detailed report with sufficient arguments to determine if the business is financially viable or not.