How much is the seasonal funding requirement during August? How much is the cost of funding if the company utilizes an aggressive funding strategy? How much is the cost of funding if the company utilizes a conservative funding strategy?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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During computation, you may round your integer data to two decimal places and your percentages and present value factors to four decimal places.
• How much is the seasonal funding
requirement during August?
• How much is the cost of funding if
the company utilizes an aggressive
funding strategy?
• How much is the cost of funding if
the company utilizes a conservative
funding strategy?
Transcribed Image Text:• How much is the seasonal funding requirement during August? • How much is the cost of funding if the company utilizes an aggressive funding strategy? • How much is the cost of funding if the company utilizes a conservative funding strategy?
Lewey Company has seasonal sales
during August. The company, at least,
holds P75,000 cash, P400,000
inventory, and P300,000 accounts
receivable. During August, inventory
and accounts receivable increase by
P300,000 and P200,000, respectively.
Accounts payable is also held at a
minimum P200,000; but increases by
P100,000 during Christmas. The rate at
which the funding requirements vary
per month is linear. The company
borrows short-term funds at 6% and
long-term funds at 7.5%, then earns 5%
on the investment of any surplus
balance.
Transcribed Image Text:Lewey Company has seasonal sales during August. The company, at least, holds P75,000 cash, P400,000 inventory, and P300,000 accounts receivable. During August, inventory and accounts receivable increase by P300,000 and P200,000, respectively. Accounts payable is also held at a minimum P200,000; but increases by P100,000 during Christmas. The rate at which the funding requirements vary per month is linear. The company borrows short-term funds at 6% and long-term funds at 7.5%, then earns 5% on the investment of any surplus balance.
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