- The following table shows the quarterly forecast of TG Corporation for its total funds requirements in the coming year:
|
Quarter |
Current Assets ($) |
Fixed Assets ($) |
Total ($) |
|
First |
30,000,000 |
30,000,000 |
60,000,000 |
|
Second |
10,000,000 |
30,000,000 |
40,000,000 |
|
Third |
30,000,000 |
30,000,000 |
60,000,000 |
|
Fourth |
20,000,000 |
30,000,000 |
50,000,000 |
Moreover, the firm earns 8 percent annually on its current assets and 25 percent annually on its fixed assets. For its liabilities, TG Corporation pays 11 percent annually on current liabilities and 15 percent annually on long-term funds.
- Calculate the annual financing costs of the aggressive funding strategy and the matching funding strategy.
- Calculate the expected annual profit of the firm on total assets for the coming year.
- Discuss the risk-return tradeoffs of the aggressive funding strategy and the matching funding strategy. [Word Limit: 525 words]
