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Forecasting and Lending

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I am having a hard time with these concepts. Please see attached for the items I need help with. Please show your work so I can grasp these concepts and methodology better.
A Company has forecast its total funds requirements for the coming year as shown in the following table:

Month Amount Month Amount
January $2,000,000.00 July $12,000,000.00
February $2,000,000.00 August $14,000,000.00
March $2,000,000.00 September $9,000,000.00
April $4,000,000.00 October $5,000,000.00
May $6,000,000.00 November $4,000,000.00
June $9,000,000.00 December $3,000,000.00

A. Divide the firms monthly funds requirement into (1) a permanent component and (2) a seasonal component
and find the monthly average for each of these components.

B. Describe the amount of long-term and short-term financing used to meet total funds requirement under (1) aggressive
funding strategy and (2) a conservative funding strategy. Assume that under the aggressive strategy, long term
funds finance permanent needs and short term funds are used to finance seasonal needs.

C. Assuming the short term funds cost 12% annually and that the cost of long term funds is 17% annually, use the average
found in part a to calculate the total cost of each of the strategies descrubed in part b.

D. Discuss the profitability risk trade offs associated with the aggressive strategy and those associated with the conservative
National Bank has analyzed the accounts receivable of ABC Software, Inc. The bank has chosen eight accounts totaling
$134,000 that will accept as collateral. The bank's terms include a lending rate set at prime + 3% and a 2% commission charge.
The prime rate is currently 8.5%.

A. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 85% of the adjusted
acceptable collateral. What is the maximum amount that the bank will lend to ABC Software?

B. What is ABC Software's effective annual rate of interest if it borrows $100,000 for 12 months ? For 6 months?
For 3 months? ( Assume a 365 day year and a prime rate that remains at 8.5 during the life of the loan)

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Solution Summary

The solution explains how to divide the funds requirements into permanent and seasonal parts and the total cost of aggressive and conservative financing strategy. It also explains how to determine the effective annual rate for loan taken against receivables.

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Need solution in an excel spreadsheet and the answer in a word doc or under need the problem in excel

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