Monalisa horticultural Ltd runs a flower export business. The company has two sources of funds at different rates. The finance cost for short-term funds is 20% while the cost of long term funds is 25%. These costs are expected to remain constant in the next two years The following are the projected monthly working capital requirements of the company for the year ending 31st December 2020

Question

Month                                 Working capital required(“000”)
January                                         35,000
February                                       35,000
March                                            52,500
April                                               70,000
May                                               105,000
June                                              157,500
July                                              210,000
August                                         242,500
September                                  157,500
October                                        87,500
November                                   70,000
December                                    52,500

Calculate

i. The average monthly permanent and seasonal working capital requirements for the
company
ii. Total cost of working capital finance for the company under an aggressive
financing policy, conservative financing policy and matching financing policy
iii. Advise the company on the appropriate working capital financing to adopt

Leave an answer

Sorry, you do not have permission to answer to this question .