The Seminole Company wishes to apply the Miller-Orr model to manage its cash investment. Seminole’s management has collected the following estimates:

Seminole management has figured, based on their experience dealing with the cash flows of the company, that there should be a cushion—
a safety stock—of cash of $20,000. Calculate the following:

a. the lower limit

b. the return point

c. the upper limit

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Cost per transaction Variance of daily cash flows Opportunity cost of cash, per day = $200 = $10,000 = 0.05%