Midwest Meats has a net cash inflow for the quarter of $2,258. The minimum and b
ID: 2769308 • Letter: M
Question
Midwest Meats has a net cash inflow for the quarter of $2,258. The minimum and beginning cash balance is $500 and the firm has $2,304 in short-term debt. The quarterly interest on the loan is $33. How much does the firm need to borrow or how much can it repay on its loans to have a zero cumulative surplus for the quarter?
a. borrow and repay $0
b. borrow $33
c. repay $2291
d. repay $2225
e. repay $2258 (*picked answer and it was wrong*)
Midwest Meats has a net cash inflow for the quarter of $2,258. The minimum and beginning cash balance is $500 and the firm has $2,304 in short-term debt. The quarterly interest on the loan is $33. How much does the firm need to borrow or how much can it repay on its loans to have a zero cumulative surplus for the quarter?
a. borrow and repay $0
b. borrow $33
c. repay $2291
d. repay $2225
e. repay $2258 (*picked answer and it was wrong*)
Explanation / Answer
The minimum and beginnning cash balance is $500
you have already carrying balance is $500 (i.e minimum balance )
To get Zero cumulative surplus for the quarter:
= carrying balance + cash flows for the quarter - any payments(interset on loan,loan repayment) - minimum balance to be maintained
= 500 + 2,258 - 33 - 500
= $ 2,225
If u repay loan of $2,225 ,the cumulative surplus for the quarter would become Zero.