Running head: CHESTER & WAYNE 1

CHESTER & WAYNE

AUTHOR

INSTITUTION
CHESTER & WAYNE 2

CHESTER & WAYNE

1.

Table 1 shows the cash flow of Chester & Wayne with the first assumptions.

Table 1: Cash flow

Octobe
  August September r November December January
Initial cash     142100 176481,6 120000 107616,2
Initial inventory     150388 151935 159530 162750
Billed sales 750000 787500 826800 868200 911600 930000
Collect sales   481500 730575 767055,6 805424,4 845707,2
Rent warehouse     24000      
Gross profit 225000 236250 248040 260460 273480 279000
Cost of goods sold 525000 551250 578760 607740 638120 651000
Selling and administrative
expenses 112500 114375 116340 118410 120580 121500
Advertising 22500 23625 24804 26046 27348 27900
Pay Expenses 81000 136800 139886 143131,2 146539 148811
Pay Equipment       250000    
Pay Dividends         45000  
Final inventory     151935 159530 162750  
Inventory purchase     580307 615335 641340  
Sell Marketable
Securities       184929 15071  
Borrow money 12384
Final cash     176482 120000 120000  
The condition for the cash flow is was minimum cash at the beginning of each month of

120,000 USD. Due to the purchase of equipment and payment of dividends it is was

necessary to sell marketable securities.

2.a.

Table 2 shows the results of the cash flow with a reduction of the gross profit to 27.5%

Table 2: Cash flow, gross profit at 27.5%

CHESTER & WAYNE 3

Septembe Decembe
  August r October November r January
Initial cash     142100 150385 120000 120000
Initial inventory     150388 157361 165228 168563
Billed sales 750000 787500 826800 868200 911600 930000
Collect sales   481500 730575 767056 805424 845707
Rent warehouse     24000      
Gross profit 206250 216563 227370 238755 250690 255750
Cost of goods sold 543750 570938 599430 629445 660910 674250
Selling and administrative expenses 112500 114375 116340 118410 120580 121500
Advertising 22500 23625 24804 26046 27348 27900
Pay Expenses 81000 136800 139886 143131 146539 148811
Pay Equipment       250000    
Pay Dividends         45000  
Final inventory     157361,3 165227,5 168562,5  
Inventory purchase     606403 637311 664245  
Sell Marketable Securities       200000    
Borrow money       33002 50360  
Final cash     150385 120000 120000  
The reduction of the gross profit requires the company to sell all its marketable securities

and borrow 83,362 USD to achieve the minimum amount of cash of the cash flow plan.

2.b.

Table 3 maintains the gross profit in 30% and increases the inventory levels to 40%.

Table 3: Cash flow, 40% inventory

Septembe Octobe
  August r r November December January
Initial cash     142100 55969 119990 120000
Initial inventory     150388 251778 264364 269700
Billed sales 750000 787500 826800 868200 911600 930000
Collect sales   481500 730575 767056 805424 845707
Rent warehouse     24000      
Gross profit 206250 216563 227370 238755 250690 255750
Cost of goods sold 543750 570938 599430 629445 660910 674250
Selling and administrative expenses 112500 114375 116340 118410 120580 121500
Advertising 22500 23625 24804 26046 27348 27900
Pay Expenses 81000 136800 139886 143131 146539 148811
Pay Equipment       250000    
CHESTER & WAYNE 4

Pay Dividends         45000  

Final inventory     251778 264364 269700  
Inventory purchase     700820 642031 666246  
Sell Marketable Securities       200000    
Borrow money       80647 29387  
Final cash     55969 119990 120000  
The increase in the inventory to 40% difficult the cash flow strategy of the company

requiring to sell all market securities and to borrow 184,499 USD

2.c.

Tables 4 and 5 shows the new cash flow without discount and with a 3% discount in sales.

Table 4 Cash flow without discount

Septembe Octobe
  August r r November December January
Initial cash     142100 190642 120000 120000
Initial inventory     150388 151935 159530 162750
Billed sales 750000 787500 826800 868200 911600 930000
Collect sales   495000 744735 781950 821050 856680
Rent warehouse     24000      
Gross profit 225000 236250 248040 260460 273480 279000
Cost of goods sold 525000 551250 578760 607740 638120 651000
Selling and administrative expenses 112500 114375 116340 118410 120580 121500
Advertising 22500 23625 24804 26046 27348 27900
Pay Expenses 81000 136800 139886 143131 146539 148811
Pay Equipment       250000    
Pay Dividends         45000  
Final inventory     151935 159530 162750  
Inventory purchase     580307 615335 641340  
Sell Marketable Securities       155875 11829  
Borrow money            
Final cash     190642 120000 120000  
Table 5 Cash flow with 3% discount

Septembe Octobe
  August r r November December January
Initial cash     142100 163209 120000 120000
Initial inventory     150388 157361 165228 168563
CHESTER & WAYNE 5

Billed sales 750000 787500 826800 868200 911600 930000

Collect sales     743398 780579 819593 848725
Rent warehouse     24000      
Gross profit 206250 216563 227370 238755 250690 255750
Cost of goods sold 543750 570938 599430 629445 660910 674250
Selling and administrative expenses 112500 114375 116340 118410 120580 121500
Advertising 22500 23625 24804 26046 27348 27900
Pay Expenses 81000 136800 139886 143131 146539 148811
Pay Equipment       250000    
Pay Dividends         45000  
Final inventory     157361 165228 168563  
Inventory purchase     606403 637311 664245  
Sell Marketable Securities       200000    
Borrow money       6655 36191  
Final cash     163209 120000 120000  
The option without discounts provides the best cash flow scenario with less cash

requirements with a total value of 167,703.80 USD from market securities.