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. 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 the permanent component of the division’s monthly working capital funding requirements.(1) Q.3.2 Determine the seasonal component and average of the division’s monthly working capital funding requirements. Round off your final answer to the nearest Rand. 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.
The Rhodium division has prepared its budget for 2020 and its
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