Reference no: EM132694082

The following information has been compiled

                                                                 July                   August                  September

Cash collections                             $50,000             $40,000                $48 000

Cash payments Purchases of inventory 31,000            22,000                    18,000

Operating expenses                          12,000                 9,000               11,600

Capital expenditures                         13,000                   25,000                 0

The cash balance at the end of the second quarter is projected to be $4,000, The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000. All financing transactions are assumed to take place at the end of the month Loan balances should be repaid in increments of $5,000 when there is surplus cash.

Problem 1: What amount of principal should the company repay to the bank at the end of September?

Option 1: $5,000

Option 2: $10,000

Option 3: $15,000

Option 4: $20,000