Divide the firms monthly funds requirement into 1 a

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Unformatted text preview: al funds requirements for the coming year as shown in the following table. Month Amount Month January $2,000,000 February 2,000,000 August March 2,000,000 September 9,000,000 April 4,000,000 October 5,000,000 May 6,000,000 November 4,000,000 June 9,000,000 December 3,000,000 July Amount $12,000,000 14,000,000 a. Divide the firm’s monthly funds requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these components. 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. 630 PART 5 Short-Term Financial Decisions c. Assuming that short-term funds cost 12% annually and that the cost of longterm funds is 17% annually, use the averages found in part a to calculate the total co...
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This document was uploaded on 01/19/2014.

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