Dynabase tool has a forecast its total funding requirements for the coming year
ID: 2720763 • Letter: D
Question
Dynabase tool has a forecast its total funding requirements for the coming year as shown in the following table:
(a) the monthly average of the firms permanent funding requirement is $_______ the monthly average of the firms seasonal funding requirement is $_______ (b) if dynabase employs an aggressive funding strategy the amount it will fund with short term debt is $_____ if dynabase employs an aggressive funding strategy the amount it will fund with long term debt is $______ if dynabase employs a conservative funding strategy the amount it will fund with long term debt is $______ (c) assuming that short tem funding costs 5% annually and that the cost of long term funds 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 the total cost under the aggressive strategy is $_____ the total cost under the conservative strategy is $______
January $2,000,000 July $10,000,000 February $2,000,000 August $16,000,000 March $2,000,000 September $8,000,000 April $3,000,000 October $4,000,000 May $7,000,000 November $5,000,000 June $10,000,000 December $4,000,000Explanation / Answer
if dynabase employs an aggressive funding strategy the amount it will fund with short term debt is $1000000 to 14000000 if dynabase employs an aggressive funding strategy the amount it will fund with long term debt is $ 2000000 if dynabase employs a conservative funding strategy the amount it will fund with long term debt is $16000000 (c) assuming that short tem funding costs 5% annually and that the cost of long term funds is 10% annually, use the averages found in part a to calculate the total cost of each of the strategies described in part B.
Aggressive = ($2,000,000* 0.10) + ($4083333.33*0.5)
= $200000+ $204166.66
= $404166.67
Conservative = ($16,000,000*.10)
= 1600000
Assume that the firm can earn 3% on any excess cash balances the total cost under the aggressive strategy is $_____ the total cost under the conservative strategy is $______
6083333.33*3% = 182500
404166.67 - 182500 = 221666.67
under conservative strategy
16000000*3% = 480000
1600000 - 480000 = 1120000
permanent requirement seasonal requirement January 2000000 2000000 0 February 2000000 2000000 0 March 2000000 2000000 0 April 3000000 2000000 1000000 May 7000000 2000000 5000000 June 10000000 2000000 8000000 July 10000000 2000000 8000000 August 16000000 2000000 14000000 September 8000000 2000000 6000000 October 4000000 2000000 2000000 November 5000000 2000000 3000000 December 4000000 2000000 2000000 answer no 1 Average permanent requirement 2000000 4083333.333Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.