Finance Analysis
Use the information below for this assignment. Comfin Company has estimates on its level of current and total assets for the next two years:
|
Year 201X
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
June
|
July
|
Aug
|
Sep
|
Oct
|
Nov
|
Dec
|
|
Total Assets
|
$500, 000
|
$475, 000
|
$460, 000
|
$470, 000
|
$475, 000
|
$485, 000
|
$495, 000
|
$555, 000
|
$600, 000
|
$650, 000
|
$700, 000
|
$750, 000
|
|
Current Assets
|
$250, 000
|
$220, 000
|
$199, 900
|
$204, 698
|
$204, 392
|
$208, 980
|
$213, 459
|
$262, 829
|
$307, 085
|
$351, 227
|
$395, 251
|
$439, 156
|
|
Year 201X + 1
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
June
|
July
|
Aug
|
Sep
|
Oct
|
Nov
|
Dec
|
|
Total Assets
|
$600, 000
|
$570, 000
|
$552, 000
|
$564, 000
|
$570, 000
|
$582, 000
|
$594, 000
|
$660, 000
|
$720, 000
|
$780, 000
|
$840, 000
|
$900, 000
|
|
Current Assets
|
$350, 000
|
$350, 000
|
$352, 100
|
$359, 302
|
$365, 608
|
$373, 020
|
$380, 541
|
$397, 171
|
$412, 915
|
$428, 773
|
$444, 749
|
$460, 844
|
a. Estimate the levels of permanent and temporary current assets for Comfin over these months. Find the average amount for fixed assets, permanent current assets, and temporary current assets in the year 201X and year 201X + 1.
b. What average amounts of short-term and long-term financing should Comfin have during each year if it wants to follow a maturity-matching financing strategy over time?
c. What average amounts of short-term and long-term financing should Comfin have during each year if it wants to follow an aggressive financing strategy over time?
d. Suppose Comfin's cost of short-term funds is 8 percent and its cost of long-term funds is 15 percent. Use your answers in (b) and (c) to compute the cost of each strategy.
e. What are the pro and con arguments toward each strategy in terms of profitability, risk, and company liquidity?
Source textbook: Melicher, R. W., & Norton, E. A. (2011). Introduction to finance: Markets, investments, and financial management (14th ed.). Hoboken, NJ: John Wiley.
Submission Requirements:
Answer each problem in detail with a conclusion and results.
Submit your answer in a Microsoft Excel file, showing step-by-step solutions to all calculations.