Question 3

Studio San, a dealer in contemporary art, has forecasted its seasonal financing needs for the next six months as

follows:

month	seasonal requirement
january	$ 1.450.000
febuary	$ 1.895.000
march	$ 2.000.000
april	$ 1.575.000
may	$ 1.342.000
june	$ 1.562.000

(a)The firm projects short-term funds will cost 11 percent and long-term funds will cost 13 percent annually.

(b)The firm's permanent funds requirement is $500,000.

Calculate financing costs for the first six months using the aggressive and conservative strategies