Part A – The Hunter Company Cash BudgetingScenarioUse the following bulleted information to complete Steps 1 and 2 below:The Hunter Company’s cash balance at June 01 is $2,000,000.Sales are made 80% on Accounts receivable and 20% for cash. OfCash payments of $3,000,000 are made for salaries and wages eaItems are purchased for resale at 50% of the sales price. For examPurchases of inventory are made 100% on Accounts payable. AccoNote: The starting point of a cash budget is the forecasted sales for the budget. All else depends on this.1. Prepare a cash budget for each of the three months of June, July2. If the Hunter Company has a loan payment of $15,000,000 duePart B – Acme Company Capital BudgetingScenarioThe Acme Company is considering investing a total of $30,000,000 in a new production line utilizing more robotsThe expected cost savings are $5,000,000 a year starting this year and continuing for the next nine years, for aThe Acme Company requires a return on investment of 12% per year, before income taxes.DirectionsComplete the following questions:1.2.3.4.Do you recommend that Acme Company make this investment?Why is the net present value approach to capital budgeting preWhat is the definition on the internal rate of return (IRR)? The IRWhat is the approximate rate of return on an investment that cone 01 is $2,000,000.le and 20% for cash. Of the 80% made on Accounts receivable, 30% are collected in the month of sale, and 70%or salaries and wages each month, and cash payments of $2,000,000 are made for other items each month.he sales price. For example, it took $10,000,000 in purchases of inventory in May to support the $20,000,000 inAccounts payable. Accounts payable are paid 10% in the month of purchase and 90% in the month after purchase depends on this.hree months of June, July and August.ent of $15,000,000 due on September 1st, will they have the cash to make this loan payment? What options don line utilizing more robots than the existing line, which will result in savings in the cost of labor. The cash outlays expectedthe next nine years, for a total of ten years. The Acme Company is not comfortable with estimating cost savings more thany make this investment? Base your answer on the expected net present value of the investment. Show all of youo capital budgeting preferred over the payback period approach to capital budgeting?te of return (IRR)? The IRR for this investment cannot be calculated. Why not?on an investment that costs $400,000 and returns $50,000 a year for ten years? Show or explain how you calculmonth of sale, and 70% are collected in the month after sale. Sales in May were $20,000,000. Expected sales fr items each month.port the $20,000,000 in sales made in May. The company has a policy of maintaining inventory at a constant $5n the month after purchase.yment? What options does the company have if they want to maintain a cash balance of $2,000,000? What areThe cash outlays expected for the new production line are: $20,000,000 now and another $10,000,000 in one year from toing cost savings more than ten years into the future, so it is assumed there are no cost savings beyond ten years and thatestment. Show all of your work. Use present value tables available online or in many books to calculate the netr explain how you calculated this00,000. Expected sales for June are $25,000,000, expected sales for July are $26,000,000, and expected sales foventory at a constant $5,000,000. Accordingly, there was $5,000,000 of inventory on hand on June 01.$2,000,000? What are the implications of these options?00,000 in one year from today.eyond ten years and that there is no resale value of the equipment and robots after ten years.oks to calculate the net present value so that your work can clearly be seen and reviewed.0, and expected sales for August are $28,000,000.nd on June 01.Part A – The Shelton Company DivisionalPerformance and InvestmentADDDviiieThe Shelton Company evaluates the performanceofeachoftheirfourdivisionsonthevvv basis of eacriiiasssInvestmentisdefinedasaveragetotalassets.giiReturnis defined as division net income. ieNoooThe table below shows information on theyear for the divisions.e most recentnnnit InvestmentsShelton Company Income andby Divisionn123vi$30,000,000$35,000,000$32,000,000 $40,000,000ensctoemde$300,000,000$340,000,000 ###$410,000,000assetsDirectionsUsing the information above, complete the following:1. Compute the return on investment for each division2. Advise Shelton Company based on the following: Th3. Calculate the residual income of each division, using4. Calculate the residual income of Division 3 if they mPart B – Should Smith Orchards throw the "Number Threes" away?Fred Smith, owner of Smith Apple Orchards, has come to you with a question. After operating for yeUpon receiving the analysis, Fred is upset. He says, "I never took accounting, and I am not a collegeThe different grades of apples all are grown on the same trees. The grades are not identified until tGrowing and harvesting costs were allocated on the basis of number of pounds sold. These were: NSmith’s Orchard Sales and Production ExpensesNo.Sales$100,000LessExpenses$90,0001$10,000Packing 10,000andshipping15,0005,000No.2$200,00030,000No.3Growing 40,000,harvesting, andsorting60,00020,000120,000Total50,000expenses75,00025,000150,000Profit or $50,000(loss)Directions$15,000($15,000)$50,000Based on your analysis of the Smith Orchards scenario, answer the following:1. What is your advice to Fred? In future harvests, sho2. How would you answer the same question by emplos on the basis of each division’s return on investment.otal assets.nt for each division.on the following: The company sends a memo to the heads of each division asking them to accept new inveseach division, using a required rate of return of 9.5%. Residual income is defined as the income after deductDivision 3 if they make the new investment. Count the new investment as having been made at the beginniAfter operating for years without trying to determine his profit or loss on the different grades of apples that he producesand I am not a college graduate. I hate to disagree with a report from a college accounting major that I paid for, but thise not identified until they are sorted into grades.s sold. These were: Number Ones – 200,000 lbs.; Number Twos – 300,000 lbs., and Number Threes – 100,000 lbs. Totaluture harvests, should he sell the number three apples or dump them? Explain your answer by preparing ane question by employing the concept of contribution margin? Illustrate your answer with a spreadsheetto accept new investments with a rate of return of 12% or more on invested assets. The head of Division 3 iincome after deducting the required rate of return, based on average invested assets, from the division’s nemade at the beginning of the year. Would you expect the head of Division 3 to make the new investment if dapples that he produces and sells, he hires a recent college graduate to prepare a profit analysis for him.that I paid for, but this says that I would be better off by dumping the number three grade of apples instead of selling tes – 100,000 lbs. Total growing and harvesting costs were $120,000.wer by preparing an income statement as if Smith dumped the number three apples rather than sold them.a spreadsheete head of Division 3 is aware of an investment costing $40,000,000 that returns12%. Should the head of Divirom the division’s net income.e new investment if division heads are evaluated based on residual income? Explain.ples instead of selling them. Is that what this means?"her than sold them.ould the head of Division 3 make this investment? Why or why not? Recall that the division heads are evaluaion heads are evaluated on the division’s return on investment. Hint: Compute the expected return on invesected return on investment for Division 3. Count the new investment as having been made at the beginningde at the beginning of the year.