2010-11-30 073051 pinigo PDF

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Solutions Guide: Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own.

( a ) St r a t e g yI —Ag gr e s s i v e ( 1)Amo un tr e qui r e d :$ 2, 5 00, 000s h or t t e r ma nd$ 1, 000, 000l on g t e r m ( 2)Cos t : ( 1 0%  $2, 500, 000) ( 14 % $ 1, 000, 000) $390 , 000 St r a t e gy2—Cons e r v a t i v e ( 1)Amo un tr e qui r e d:$ 7, 000, 00 0l o n g t e r ma n d$0s hor t t e r m ( 2)Cos t : ( 1 4%  $7, 000, 00 0) $9 80, 000 St r a t e gy3—Tr ade o ff ( 1)Cal c ul a t i o nofs hor t t e r mr e qui r e me nt s

Mont h J a n ua r y Fe b r ua r y Ma r c h Ap r i l Ma y J une J ul y Au g us t Se pt e mb e r Oc t obe r No v e mbe r De c e mbe r

( 1 ) To t alFunds Re qui r e me nt s $1, 0 00, 000 1, 0 00 , 000 2, 0 00 , 000 3, 000, 000 5, 000, 000 7, 000, 000 6, 000, 000 5, 000 , 000 5 , 000, 000 4, 000, 000 2, 000 , 000 1, 000 , 0 00

( 2) Pe r ma ne nt Re qui r e me nt s $3, 000, 000 3, 000, 000 3, 000, 000 3, 000, 000 3 , 000, 000 3 , 000, 000 3 , 000, 000 3 , 000, 000 3, 000 , 00 0 3, 000 , 0 00 3, 000 , 0 00 3, 00 0 , 000

Se as o nal Re qui r e me nt s $0 0 0 0 2, 000 , 000 4, 000 , 000 3, 000 , 000 2 , 000, 000 2 , 000, 00 0 1 , 000, 000 0 0

Mo nt h l yAv e r a g e :Pe r ma ne n t $ 3, 000, 000 Se a s ona l $ 1 , 166, 667( s umofs e a s on a lr e q ui r e me nt s 12) Se a s ona l $ 1 , 166, 667( 14, 0 00, 000 12) ( 2)Cos t : ( 10%  $ 1, 166 , 667) ( 14%  $3, 00 0, 000) $5 36, 667 ( b) Ne two r ki n gc a pi t a l Cur r e nta s s e t s Cur r e n tl i a b i l i t i e s Aggr e s s i v e $ 4, 000, 000 $2, 50 0, 000 $1, 500 , 000 Cons e r v a t i v e $4 , 000, 000 $0 $4 , 000 , 000 Tr a de o ff $4 , 000, 000 $1, 166, 6 67 $2 , 833, 33 3 ( c ) Thet h r e es t r a t e gi e sdi ffe ri nt e r msofp r o fit a b i l i t ya ndr i s k . Th ea g gr e s s i v es t r a t e gyi st h e mos tpr o fit a b l e i t ha st h el o we s tc os t ,$390 , 0 00be c a u s ei t us e st h el a r g e s ta mountoft h e l e s s e xpe n s i v es hor t t e r mfina nc i n g . I ta l s opa y si nt e r e s ton l yonne e de dfin a n c i n g . The a g gr e s s i v es t r a t e g yi sa l s ot hemo s tr i s ky , r e l yi n ghe a v i l yons hor t t e r mfina n c i n g , whi c hma y ha v emo r el i mi t e da v a i l a b i l i t y .Ne twor k i n gc a pi t a li sl o we s t , a l s oi n c r e a s i n gr i s k. Be c a u s et h ec ons e r v a t i v es t r a t e gyf un dst h ehi ghe s ta mounti na n ymon t hf o rt hewhol ey e a r wi t hmor e e x p e n s i v el o n g t e r mfina nc i n g , i ti st h emos te x p e ns i v e( $ 980, 000)a ndt h el e a s t pr o fit a b l e . I ti st h el o we s t r i s ks t r a t e g y , ho we v e r , r e s e r v i n gs hor t t e r mfina n c i n gf or e me r g e n c i e s .Thehi ghl e v e lofwo r ki n gc a pi t a la l s or e duc e sr i s k . Thet r a d e o ffs t r a t e gyf a l l sbe t we e nt h et woe xt r e me si nt e r msofbot hpr ofit a bi l i t ya ndr i s k . Thec os t( $ 536 , 667)i shi ghe rt h a nt h ea gg r e s s i v es t r a t e g ybe c a us et h epe r ma ne n tf unds r e q ui r e me ntof$3, 000 , 000i sfin a nc e dwi t hmor ec o s t l yl o n g t e r mf unds . I nfiv emont h s ( J a nua r y , Fe br u a r y , Ma r c h, No v e mb e r , a ndDe c e mb e r ) ,t hec ompa n yp a y si n t e r e s ton unne e de df unds . Th er i s ki sl e s st h a nwi t ht hea g gr e s s i v es t r a t e gy ; s omes hor t t e r m bor r o wi n gc a pa c i t yi spr e s e r v e df o re me r g e nc i e s . Be c a us eap or t i onofs h or t t e r m r e q ui r e me nt si sfin a n c e dwi t hl o n g t e r mf u nds , t hefir m’ sa bi l i t yt oob t a i ns hor t t e r m fin a nc i n gi sg ood. Mr . Me r c a d os houl dc o ns i de ri mpl e me n t i n gt h et r a de o ffs t r a t e gy . Th ewi des wi n g si n mont hl yf undsr e qui r e me nt sma k et h ec os to ft hec ons e r v a t i v es t r a t e g yv e r yhi g hi n c ompa r i s ont ot her e d uc e dr i s k. Fo rt hes a mer e a s on, t hea ggr e s s i v es t r a t e gyi sq ui t er i s ky , r e q ui r i n gt h efir mt or a i s es hor t t e r mf un dsr a n gi n gf r om$1, 000 , 000t o$6, 00 0, 000. I fi t s houl db e c omedi ffic ul t t oa r r a n g es ho r t t e r mfina n c i n g , Ka n t onCo mpa n ywoul dbei n t r o ubl e . Not e :Ot h e rr e c omme nda t i onsa r epo s s i bl e , de p e ndi n gont hes t ude nt ’ sr i s kpr e f e r e nc e .Of c ou r s e , t h es t ude nts hou l dpr e s e n ts ou ndr e a s on sf orhi sorhe rc ho i c eofs t r a t e gy . ( d )( 1)Effe c t i v ei nt e r e s t , l i neofc r e di t : I n t e r e s tonbor r o wi n g:$600, 0 00 ( 7%  2 . 5%) $57, 000 I n t e r e s t $ 5 7 , 0 0 0 Eff e c t i v ei n t e r e s t 1 . 8 8 %    1 Amo u n ta v a i l a b l ef o ru s e $ 6 0 0 , 0 0 00 . 8 0 ( 2)Effe c t i v ei n t e r e s t , r e v o l vi n gc r e di ta gr e e me nt : Cos tofbor r o wi n g: I n t e r e s t : $600, 00 0 ( 7%  3 . 0%) $60 , 000 Commi t me n tFe e :$40 0, 000 0. 5% 2 , 000 To t a l $ 6 2, 000

I n t e r e s t a n dc o mmi t me n t f e e Eff e c t i v ei n t e r e s t  Amo u n ta v a i l a b l ef o ru s e $ 6 2 , 0 0 0 2 . 9 2 %  1 $ 6 0 0 , 0 0 00 . 8 0 ( e ) Thel i n eofc r e d i ta r r a n g e me nts e e msbe t t e r , s i n c ei t sa n nua lc os tof11 . 88% i sl e s st h a nt h e 12. 92 %c os toft her e v ol vi n gl o a na r r a n g e me nt .Ka nt o nwi l ls a v ea b out1% i nt e r msof a nn ua li n t e r e s tc o s t( 11. 88% v e r s us12 . 92 %)b yus i n gt h el i neo fc r e di t .Theonl yn e g a t i v ei s t h a ti fThi r dNa t i on a ll a c ksl oa n a bl ef u nds ,Ka nt o nma yno tbea bl et obor r o wt h ene e d e d f unds . Unde rt h er e v ol vi n gc r e di t a gr e e me n t , f undsa v a i l a bi l i t ywoul dbegua r a n t e e d ....