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Aggressive versus conservative seasonal funding strategy Dynabase Tool has forecast its total funding requirements for the coming year as shown in the following table a. Divide the firm's monthly funding requirement iro (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 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 The monthly average of the firm'a permanent funding requirement is $(Round to the nearest dollar) The monthly average of the firm's sonsonal funding requirement is $ (Round to the narest dolar) 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 conservativo funding strategy Dynabase employs an aggressive funding strategy, the amount it will fund with short-term debt is $ (Round to the nearest dollar) Il Dynabuse employs an aggressive funding strategy, the amount it will tund with 78ng-term debt is $. (Round to the nearest dollar) If Dynabase employs a conservativo funding strategy, the amount it wil fund with long-term debt is $(Round to the nearest dollar) c. Assuming that short-term funding costs 5% annually and that the cost of long-term funds is 10% annually, use the averages found in part a to calculato the total cost of each of the strategies described in part b. Assume that the firm can cam 3% on any excess cash balances The total cost under the aggressive strategy is $(Round to the nearest dollar) S Aggressive versus conservative seasonal funding strategy Dynabaso Tool has forecast its total funding requirements for the coming year as shown in the following 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 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 financo permanent noods 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 average found in part a to calculate the total cost of each of the strategias 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 It Dynabase employs an aggressive funding strategy, the amount it will tund with long-term debt is $ (Round to the nearest dollar) I Dynabase employs a conservative funding strategy, the amount it will fund with long-term debt is $ . (Round to the nearest dollar) c. Ansuring that short-term funding conts 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 $(Round to the nearest dollar) The total cost under the conservative strategy is $|| (Round to the nearest dollar) d. In light of the profitability-risk tradeoffs associated with the aggressive strategy and those associated with the conservative strategy, which of the following statements is falso? (Select the best answer below) O A. In this case, the conservative strategy is more attractive because costs han O B. In general, an aggressivo strategy entails moro risk because of interest rato swings and possible difficultios obtaining financing quickly OC. In this casotho aggressive strategy is more attractivo bocause of the targe difference betwoor short-term vs. long-dorm rates, OD. In general, a conservative strategy will cost the firm more because it requires the firm to pay intocost on unneeded funds Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Month January February March April May June Amount $2,000,000 $2,000,000 $2,000,000 $3,000,000 $7,000,000 $10,000,000 Month July August September October November December Amount $13,000,000 $15,000,000 $9,000,000 $5,000,000 $3,000,000 $4,000,000 Print Done
