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the most likely estimate is based on the expected outcomes presented earlier during 681269

Table 3.11 presents the summary of Coulson Industries’ cash budget prepared for each month of concern using pessimistic, most likely, and optimistic estimates of total cash receipts and disbursements. The most likely estimate is based on the expected outcomes presented earlier. During October, Coulson will, at worst, need a maximum of $15,000 of financing and, at best, will have a $62,000 excess cash balance. During November, its financing requirement will be between $0 and $185,000, or it could experience an excess cash balance of $5,000. The December projections show maximum borrowing of $190,000 with a possible excess cash balance of

TABLE 3.11

A Sensitivity Analysis of Coulson Industries’ Cash Budget ($000)

 

October

 

 

November

 

 

December

 

Pessi

Most

Opti

Pessi

Most

Opti

Pessi

Most

Opti

mistic

likely

mistic

mistic

likely

mistic

mistic

likely

mistic

Total cash

 

 

 

 

 

 

 

 

 

receipts

$160

$210

$285

$210

$320

$ 410

$275

$340

$422

Less: Total cash

 

 

 

 

 

 

 

 

 

disbursements

200

213

248

380

418

467

280

305

320

Net cash flow

($ 40)

($ 3)

$ 37

($170)

($ 98)

($ 57)

($ 5)

$ 35

$102

Add: Beginning

 

 

 

 

 

 

 

 

 

cash

50

50

50

10

47

87

(160)

(51)

30

Ending cash

$ 10

$ 47

$ 87

($160)

($ 51)

$ 30

($165)

($ 16)

$132

Less: Minimum

 

 

 

 

 

 

 

 

 

cash balance

25

25

25

25

25

25

25

25

25

Required total

 

 

 

 

 

 

 

 

 

financing

$ 15

$185

$ 76

$190

$ 41

Excess cash

 

 

 

 

 

 

 

 

 

balance

$ 22

$ 62

$ 5

$107

$107,000. By considering the extreme values in the pessimistic and optimistic outcomes, Coulson Industries should be better able to plan its cash requirements. For the 3 month period, the peak borrowing requirement under the worst circumstances would be $190,000, which happens to be considerably greater than the most likely estimate of $76,000 for this period.

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