I already calculated the answers for a. and b. I need help with c. and d. only.
ID: 2720511 • Letter: I
Question
I already calculated the answers for a. and b. I need help with c. and d. only. Thank you.
Month Amount permanet seasonal January $2,000,000 $2,000,000 $0 February $2,000,000 $2,000,000 $0 March $2,000,000 $2,000,000 $0 April $4,000,000 $2,000,000 $2,000,000 May $6,000,000 $2,000,000 $4,000,000 June $9,000,000 $2,000,000 $7,000,000 July $12,000,000 $2,000,000 $10,000,000 August $14,000,000 $2,000,000 $12,000,000 September $9,000,000 $2,000,000 $7,000,000 October $5,000,000 $2,000,000 $3,000,000 November $4,000,000 $2,000,000 $2,000,000 December $3,000,000 $2,000,000 $1,000,000 Dynabase Tool has forecast its total funding requirements for the coming Aggressive versus conservative seasonal funding strategy year as shown in the following table: ith fong table a. Divide the firm's monthly funding requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these mponents b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under (1) an aggressive funding strategy and (2) a conservative funding strategy. Assume that under the aggressive strategy, long-term funds finance permanent needs and short-term funds are used to finance seasonal needs. c. Assuming that short-term funding costs 5% annually and that the cost of long-term runding is 10% annually use the averages found in part a to calculate the total cost of each of the strategies described in part b. Assume that the firm can earn 3% on any excess cash balances d. Discuss the profitability-risk trade-offs associated with the aggressive strategy and those associated with the conservative strategy.Explanation / Answer
Answer :-
Month Amount Permanent Interest Rate @ 5% Seasonal Interest Rate @ 10% Jan 2000000 2000000 =(2000000*5%*12month/12) = 100000 0 0 Feb 2000000 2000000 91667 0 0 March 2000000 2000000 83333 0 0 April 4000000 2000000 75000 2000000 150000 May 6000000 2000000 66667 4000000 266667 June 9000000 2000000 58333 7000000 408333 July 12000000 2000000 50000 10000000 500000 Aug 14000000 2000000 41667 12000000 500000 Sep 9000000 2000000 33333 7000000 233333 Oct 5000000 2000000 25000 3000000 75000 Nov 4000000 2000000 16667 2000000 33333 Dec 3000000 2000000 8333 1000000 8333 TOTAL $ 72000000 $ 24000000 $ 650000 $ 48000000 $ 2174999Related Questions
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