1. **State the problem:** Calculate the cash budget for each quarter, including borrowings and repayments, to maintain a minimum cash balance of $10,000. 2. **Given data:** - Beginning cash balance: $38,000 - Minimum cash balance required: $10,000 - Quarterly interest rate: 3% - Cash receipts and disbursements for each quarter: - Q1: Receipts $270,000, Disbursements $323,000 - Q2: Receipts $420,000, Disbursements $293,000 - Q3: Receipts $300,000, Disbursements $283,000 - Q4: Receipts $320,000, Disbursements $303,000 3. **Formula and rules:** Cash balance at end of quarter = Beginning cash + Receipts - Disbursements + Borrowings - Repayments Borrow if cash balance falls below $10,000 to maintain minimum balance. Interest on loans is 3% quarterly, paid when repaid. 4. **Calculate quarter by quarter:** **Quarter 1:** \[ \text{Beginning cash} = 38000 \] \[ \text{Cash available before borrowing} = 38000 + 270000 - 323000 = -15000 \] Since -15000 < 10000 (minimum), borrow enough to reach $10,000: \[ \text{Needed} = 10000 - (-15000) = 25000 \] Borrow $25,000. Ending cash: \[ -15000 + 25000 = 10000 \] **Quarter 2:** \[ \text{Beginning cash} = 10000 \] \[ \text{Cash available before borrowing} = 10000 + 420000 - 293000 = 137000 \] No borrowing needed since $137,000 > $10,000. Assuming no repayment yet. **Quarter 3:** \[ \text{Beginning cash} = 137000 \] \[ \text{Cash available before borrowing} = 137000 + 300000 - 283000 = 154000 \] No borrowing needed. **Quarter 4:** \[ \text{Beginning cash} = 154000 \] \[ \text{Cash available before borrowing} = 154000 + 320000 - 303000 = 171000 \] No borrowing needed. 5. **Loan repayment and interest:** Loan principal = $25,000 from Q1. Interest for one quarter = $25000 \times 0.03 = 750 Repay loan at end of Q4: Total repayment = $25000 + $750 = $25750 Ending cash after repayment: \[ 171000 - 25750 = 145250 \] **Final summary:** - Borrow $25,000 at start of Q1 - Maintain minimum cash balance $10,000 each quarter - Repay loan plus interest $25,750 at end of Q4 - Ending cash balance after repayment: $145,250 **Answer:** The company needs to borrow $25,000 at the beginning of Q1 and repay $25,750 at the end of Q4 to maintain the minimum cash balance of $10,000 throughout the year.