Lindsey Chocolate, Inc has prepared its third quarter budget and provided the following data
Jul Aug Sep
Cash collections $49,000 $39,500 $47,200
Cash payments:
Purchases of direct materials 30,000 21,900 18,000
Operating expenses 12,400 8,400 11,400
Capital expenditures 13,400 24,200 0
The cash balance on June 30 is projected to be $4,000. The company has 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 and has to pay interest every month at an annual rate of 4%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash. Calculate the ending projected cash balance before financing for August.
A) $7,167
B) $5,000
C) $46,700
D) $(7,833 )
D .
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