Table 15.3
-Ace's Business Forms pays 8 percent on short-term funds and 10 percent on long-term funds. Determine its annual financing costs using the trade-off strategy described: Ace's Business Forms has seasonal financing requirements ranging from zero to $50,000 per month. Based on this range, the firm has decided to finance $25,000 per month of the seasonal funds with long-term debt and the rest of the seasonal funds with short-term debt. The permanent funds requirement will be financed with long-term funds. (See Table 15.3)

Question

Table 15.3 
-Ace's Business Forms pays 8 percent on short-term funds and 10 percent on long-term funds. Determine its annual financing costs using the trade-off strategy described: Ace's Business Forms has seasonal financing requirements ranging from zero to $50,000 per month. Based on this range, the firm has decided to finance $25,000 per month of the seasonal funds with long-term debt and the rest of the seasonal funds with short-term debt. The permanent funds requirement will be financed with long-term funds. (See Table 15.3)

Quizplus · Accepted Answer

The Answer of Table 15.3 
-Ace's Business Forms pays 8 percent on short-term funds and 10 percent on long-term funds. Determine its annual financing costs using the trade-off strategy described: Ace's Business Forms has seasonal financing requirements ranging from zero to $50,000 per month. Based on this range, the firm has decided to finance $25,000 per month of the seasonal funds with long-term debt and the rest of the seasonal funds with short-term debt. The permanent funds requirement will be financed with long-term funds. (See Table 15.3)

Table 15.3 -Ace's Business Forms Pays 8 Percent on Short-Term Funds and Short-Term