Reference no: EM132656364

Brownstein Inc. expects sales of $100,000 during each of the next 3 months. It will make monthly purchases of $60,000 during this time. Wages and salaries are $10,000 per month plus 5% of sales. Brownstein expects to make a tax payment of $20,000 in the next month, a $15,000 purchase of fixed assets in the second month and to receive $8,000 in cash from the sale of an asset in the third month. All sales and purchases are for cash. Beginning cash and the minimum cash balance are assumed to be zero.

Question 1: Besides, the firm is unsure of the sales levels, but all other figures are certain. If the most pessimistic sales figure is $80,000 per month and the most optimistic is $120,000 per month, which of the following statements is correct?

A. For the 3-month period, the peak borrowing requirement under the worst circumstances would be $23,000.

B. The firm will, at best, have a $53,000 excess cash in the third month.

C. For the 3-month period, the firm is possible to experience an excess cash balance that ranges from $15,000 to $105,000.

D. The financing requirement for the third month is most likely to be $48,000.