Question
Question 3 (Marks: 15) The Rhodium division has prepared its budget for 2020 and its working capital requirements are summarised below: MONTH Rand January 8
Question 3 (Marks: 15)
The Rhodium division has prepared its budget for 2020 and its working capital requirements are summarised below:
MONTH Rand
January 8 450 000
February 9 150 000
March 6 250 000
April 3 750 000
May 2 850 000
June 10 500 000
July 2 925 000
August 10 625 000
September 5 200 000
October 4 600 000
November 7 300 000
December 8 100 000
The division is deciding whether to adopt an aggressive funding strategy or a conservative funding strategy. Shortterm funds can be borrowed at a rate of 16,25% per annum and longterm funds at a rate of 19% per annum.
REQUIRED:
Q.3.1 Determine the permanent component of the divisions monthly working capital funding requirements.(1)
Q.3.2 Determine the seasonal component and average of the divisions monthly working capital funding requirements. Round off your final answer to the nearest Rand.(7)
Q.3.3 Calculate the total average monthly cost if the Rhodium division adopts an aggressive funding strategy. Round off all calculations to the nearest Rand. (7)
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Financial Management For Decision Makers
Authors: Peter Atrill
8th Edition
129213433X, 978-1292134338
