Question: Question 3 (Marks: 15) The Rhodium division has prepared its budget for 2020 and its working capital requirements are summarised below: MONTH Rand January 8

Question 3 (Marks: 15)

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. Shortterm funds can be borrowed at a rate of 16,25% per annum and longterm funds at a rate of 19% per annum.

REQUIRED:

Q.3.1 Determine the permanent component of the divisions monthly working capital funding requirements.(1)

Q.3.2 Determine the seasonal component and average of the divisions monthly working capital funding requirements. Round off your final answer to the nearest Rand.(7)

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. (7)

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