Dynabase Tool has forecast its total funds 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 $14,000,000$

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 $3,000,000$

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.

c$.$ Assuming that short$-$term funds cost $5\%$ 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.

d$.$ Discuss the profitability$$risk tradeoffs associated with the aggressive strategy and those associated with the conservative strategy.

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