32 Baumol Model Lisa Tylor, CFO of Purple Rain Co., concluded from the Baumol model that the...
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32 Baumol Model Lisa Tylor, CFO of Purple Rain Co., concluded from the Baumol model that the optimal cash balance for the firm is $10 million. The annual interest rate on marketable securities is 5.8 per cent.
The fixed cost of selling securities to replenish cash is $5,000. Purple Rain’s cash flow pattern is well approximated by the Baumol model. What can you infer about Purple Rain’s average weekly cash disbursement?
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