Poor Richard's Pizza provides you with the following information for January and February:

– Cash collections on sales are $500,000 in January and $1,100,000 in February.

– Cash outlays for Operating Costs and Inventory are expected to be $900,000 for

January and $800,000 for February. All amounts are paid in the month incurred.

– The company expects to pay cash dividends o shareholders in February in the amount

of $200,000.

– The Company's January 1 cash balance is $100,000.

– The company has no loans outstanding at December 31.

– The company has $200,000 in outstanding receivables January 1. All amounts will

be collected in January.

– The company would like to have a minimum cash balance of $100,000 at the end of

each month. If their end of month balance drops below $100,000, they can borrow

money from the bank at a rate of 12% per annum (1% per month. Loan assumed

to be borrowed at the beginning of the month. Interest paid at the end of the month

the loan is repaid.

After preparing a Cash Receipts and Disbursements budget, what is the maximum LOAN REPAYMENT (PRINCIPAL + INTEREST) that Poor Richards can make in February.

Select one:

a. February Loan Repayment:
Principal: $200,000
Interest: $4,000

b. February Loan Repayment:
Principal: $100,000
Interest: $2,000

c. February Loan Repayment:
Principal: $200,000
Interest: $2,000

d. Poor Richard's is unable to make any loan repayments in February

e. None of the other answers are correct

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