Assume the following situation for PepsiCo Inc.: PepsiCo ended 20X3 with cash of $200 million. At December 31, 20X3, Bob Detmer, the CFO of PepsiCo, is preparing the budget for 20X4. During 20X4, Detmer expects PepsiCo to collect $26,400 million from customers and $80 million from interest earned on investments. PepsiCo expects to pay $12,500 million for its inventories and $5,400 million for operating expenses. To remain competitive, PepsiCo plans to spend $2,200 million to upgrade production facilities and an additional $350 million to acquire other companies. PepsiCo also plans to sell older assets for approximately $300 million and to collect $220 million of this amount in cash. PepsiCo is budgeting dividend payments of $550 million during the year. Finally, the company is scheduled to pay off $1,200 million of long term debt plus the $6,600 million of current liabilities left over from 20X3. Because of the growth planned for 20X4, Detmer budgets the need for a minimum cash balance of $300 million.
Required
- How much must PepsiCo borrow during 20X4 to keep its cash balance from falling below $330 million? Prepare the 20X4 cash budget to answer this important question.