Dynabase Tool has forecast its total funding requirements for the coming year as shown in the following table:

Month	Amount	Month	Amount
January	$2,000,000	July	$12,000,000
February	$2,000,000	August	$15,000,000
March	$2,000,000	September	$9,000,000
April	$3,000,000	October	$5,000,000
May	$7,000,000	November	$4,000,000
June	$9,000,000	December	$4,000,000

(Please show work)

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 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.

c.Assuming that short-term funding costs 5% annually and that the cost of long-term funding 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.