O'Reilly, Inc has prepared its third quarter budget and provided the following data
Jul Aug Sep
Cash collections $51,000 $39,700 $47,900
Cash payments:
Purchases of direct materials 30,000 21,900 17,000
Operating expenses 12,200 8,100 11,300
Capital expenditures 13,400 24,700 0
The cash balance on June 30 is projected to be $4,500. 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 amount of principal repayment at the end of September.
A) $5,000
B) $10,000
C) $15,000
D) $20,000
D .D)
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