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10 August, 18:36

Johnson's Tree Farm has a cash balance of $33 and a short-term loan balance of $200 at the beginning of quarter 1. The net cash inflow for the first quarter is $89 and for the second quarter there is a net cash outflow of $44. All cash shortfalls are funded with short-term debt. The firm pays 2 percent of its prior quarter's ending loan balance as interest each quarter. The minimum cash balance is $25. What is the short-term loan balance at the end of the first quarter

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  1. 10 August, 22:32
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    Short term balance at end of quarter = $107

    Explanation:

    given data

    cash balance = $33

    short-term loan balance = $200

    net cash inflow = $89

    net cash outflow = $44

    pays = 2 percent

    minimum cash balance = $25

    to find out

    short-term loan balance at the end of the first quarter

    solution

    first we get here total cash position at end of first quarter that is

    total cash position = $ 33 + $89

    total cash position = 122

    and

    interest paid on loan is 2% that is

    interest paid on loan = 2% of 200

    interest paid on loan = $4

    so here Short term balance at end of quarter will be

    Short term balance at end of quarter = previous short term balance + interest paid - cash position at end of quarter + minimum cash required ... 1

    Short term balance at end of quarter = $200 + $4 - $122 + $25

    Short term balance at end of quarter = $107
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