EXCEL PROBLEM3: CASH BUDGET

Suppose Sprint Incorporated, the long-distance telephone company, is preparing its
cash budget for 2011. The company ended 2010 with $126 million in cash, and top
management foresees the need for a cash balance of at least $125 million to pay all
bills as they come due in 2011.
Collections from customers are expected to total $11,813,000,000 during 2011, and
payments for the cost of services and products should reach $6,166,000,000.
Operating expense payments are budgeted at $2,744,000,000.
During 2011, Sprint expects to invest $2,826,000,000 in new equipment, $275 million
in the company’s cellular division, and to sell older assets for $116 million. Debt
payments scheduled for 2011 will total $597 million. The company forecasts net
income of $890 million for 2011 and plans to pay $338 million to its owners. Assume
a 40% income tax rate.
Required:
A. Using Excel, prepare Sprint’s cash budget for 2011. Be sure to use proper form for
your work with appropriate headings and explanations (I suggest you find a suitable
cash budget format and use it).
B. Will the budgeted level of cash receipts leave Sprint with the desired ending cash
balance of $125 million, or will the company need additional financing?

 

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