The Rhodium division has prepared its budget for 2020 and its working capital requirements are summarised below: MONTH Rand January 8 450 000February 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 000November 7 300 000 December 8 100 000 The division is deciding whether to adopt an aggressive funding strategy or a conservative funding strategy.Short-term funds can be borrowed at a rate of 16,25% per annum and long-term funds at a rate of 19% per annum. REQUIRED: Q.3.1 Determine thepermanent component of the division's monthly working capital funding requirements Q.3.2 Determine the seasonal component and average of thedivision's monthly working capital funding requirements. Round off your final answer to tne nearest Rand. Q.3.3 Calculate the total average monthlycost if the Rhodium division adopts an aggressive funding strategy. Round off all calculations to the nearest Rand

Working capital is the amount which is used to finance the difference between the disbursements and…

Answered: The Rhodium division has prepared its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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An investment center in Shellforth Corporation was asked to identify three proposals for its capital budget. Details of those proposals are as follows. Capital Budget Proposals Capital required Annual operating return $ 96,000 $ 60,000 20,400 $ 180,000 16,200 24,960 Shellforth uses residual income to evaluate all capital budgeting projects. Its minimum required return is 10 percent. a-1. Assume you are the investment center manager. Calculate the residual income for each project? a-2. Which project do you prefer? b-1. Assume your investment center's current ROI is 18 percent and that the president of Shellforth is thinking about using ROI for the investment center's evaluation. Calculate the ROI for each project? b-2. Would your preferences for the projects listed change? Complete this question by entering your answers in the tabs below. Reg A1 Req A2 Req B1 Req B2 Assume you are the investment center manager. Calculate the residual income for each project? Project A Project B Project…
Please help me. Thankyou.
The following table tracks the main components of working capital over the life of a four-year project. Accounts receivable Inventory Accounts payable Net working capital Cash flows 2019 2019 0 95,000 35,000 2021 2020 2022 190,000 265,000 230,000 150,000 150,000 115,000 60,000 70,000 45,000 Calculate net working capital and the cash inflows and outflows due to investment in working capital. (Negative answers should be indicated by a minus sign.) 2020 2021 2023 0 0 0 2022 2023
Consider that you are evaluting the following projects to undertake as per your capital budgeting activity You have capital budget constarin of 10,000. Project #3 and Project#4 are mutually exclusive. You have extimated your WACC as 12%.
Plug N’ Play Inc. is considering financing a project as part of its regular capital budgeting process. The company wants to reevaluate its cost of capital for the upcoming projects. The company uses all the three components of capital for raising its fund; debt, preferred and common equity maintaining a target capital structure of 30%, 20%, and 50%. The company’s corporate tax is40%. Based on the above information, answer the following questions:a. If the company would be able to issue new 20-year debt with a cost of 10%, what is the after-tax component cost of the new debt?b. It can issue perpetual preferred stock at a price of $40 a share. The issue is expected to pay a constant annual dividend of $5.00 a share. The floatation cost on the issue is estimated to be 5 percent. What is the component cost of the new preferred stock?
Year 1 $375,000 Year 2 $500,000 Year 3 $425,000 Year 4 $500,000 Which of the following is the correct calculation of project Sigma's IRR? O 46,74% O 40.64% O 36.58% O 44.70% If this is an independent project, the IRR method states that the firm should If the project's cost of capital were to increase, how would that affect the IRR? O The IRR would not change. O The IRR would increase. O The IRR would decrease.
The financial analyst at Carlo Products is evaluating two new capital budgeting proposals. Below is all about two proposed projects, both with 5 years of expected lives and identical initial outlays of RM 8,000 for project A and RM20,000 for project B. The project has been established at 15 per cent. The expected free cash flows from each project are as follows: Project A Project B Initial outlay (8,000) (20,000) Year 1 2,000 5,000 Year 2 4,000 4,000 Year 3 1,000 3,000 Year 4 3,000 6,000 Year 5 2,000 7,000 In evaluating these projects, please respond to the following questions: Calculate all the methods below and advise Carlo Products. a) Payback Period b) Net present Value c) Profitability index.
An engineering firm is considering THREE investment plans. The capital budget will only allow to accept ONE of the three alternatives. Financial data for the three plans are given in Table 4. The bank interest is 8%, compounded annually. (a) Compare the THREE plans based on present worth method of comparison. (b) Propose the best plan from the calculated present worth values.
Suppose a company has the following three project and limits it capital budget to $50,000. Project Present Value of Cash Initial Investment A. $40,000. $25,000B. 37,500. 25,000C. 70,000. 50,0001. Calculate the projects' NPVs.2. Calculate the projects' PIs.3. Which project (s) should the company choose? Why?
, a worldwide health care company, looks to invest $50 million in new technologies for diagnostic instrument systems. This investment into research and development would appear in which of Abbot's budgets? a) cash budget b) capital budget c) operating budget d) zero-balance budget Saved
Capital budgeting is an important topic, and there are websites designed to help people understand the methods available. Access TeachMeFinance.com’s capital budgeting web page ( teachmefinance.com/capitalbudgeting.html). This web page contains an example of a capital budgeting case involving a $15,000 initial cash outflow. Required Compute the payback period and the net present value (assuming a 10% required rate of return) of the following investment—assume that its cash flows occur at year-end. Compared to the example case at the website, the larger cash inflows in the example below occur in the later years of the project’s life. Is this investment acceptable based on the application of these two capital budgeting methods? Explain. Period 0 Period 1 Period 2 Period 3 Period 4 Period 5 Cash flow. . . . . . . . . . . . . . $(15,000) $1,000 $2,000 $3,000 $6,000 $7,000
Purple Whale Foodstuffs Inc. is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Purple Whale Foodstuffs Inc. has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Purple Whale Foodstuffs Inc.'s WACC is 8%, and project Sigma has the same risk as the firm's average project. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $275,000 Year 2 $400,000 Year 3 $450,000 Year 4. $425,000 Which of the following is the correct calculation of project Sigma's IRR? 28.19% O 32.22% O 29.54% O 26.85%

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