Steep Mountain Oil has a cash balance of $15and a short-term loan balance of $53 at the beginning of Q1.The net cash outflow for Q1of $39and for Q2 there is a net cash inflow of $23.All cash shortfalls are funded with short-term debt.The firm pays 1.1 percent of its prior quarter's ending loan balance as interest each quarter.The minimum cash balance is $15.What is the short-term loan balance at the end of the Q2?

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The correct answer is A.The short-term loan balance at the end of Q2 is $70.6. This is calculated as follows:Beginning cash balance: $15Beginning short-term loan balance: $53Net cash outflow for Q1: $39Net cash inflow for Q2: $23Interest on short-term loan for Q1: $0.58 ($53 * 1.1%)Interest on short-term loan for Q2: $0.77 ($70.6 * 1.1%)Ending cash balance: $15Ending short-term loan balance: $70.6

Steep Mountain Oil Has a Cash Balance of $15and a Short-Term