1. (8 points) Sunlight Essentials has provided us the following information: Management has discovered that its minimum cash balance should be P200,000 at all times. Interest rates on its existing marketable securities average 3.65% p.a. Cost per transaction is P500. Variance of its daily cash balance is P6,400,000,000. Assume 365 days in a year. Please answer the following questions. Make sure to show your solutions and to draw out the graph. a. The company's cash balance has increased to P700,000. Does the company need to do anything (buy marketable securities or sell marketable securities)? If yes, what should it do and by how much? b. The company's cash balance has increased to P1.200,000. Does the company need to do anything (buy marketable securities or sell marketable securities)? If yes, what should it do and by how much? 2. (6 points) You are the finance manager of Sunlight Essentials. One of your main targets is to optimize your company's cash balance to ensure that the company always has sufficient cash but at the same time is able to earn as much interest/gains as possible. You have been given the following marketable securities as investment options. Which of these would you have your company invest in and why? You may allocate percentages to all or some of these marketable securities (i.e. 50% to BPI Time Deposit / 50% to Philippine Tbill). Keep in mind that all these would have transaction costs so if you decide to invest in all of these securities in equal proportion, remember that your transaction costs would also be higher. Marketable Securities List: Short Term T-Bills US Tbills: 0.10% p.a. Argentinian Tbills: 15.83% p.a. Philippine Tbills: 1.52% p.a. Commercial Paper Phoenix Petroleum: 5% p.a. Time Deposit BPI: 0.25% p.a. Tanay Rural Bank: 4% p.a. Stocks Cebu Pacific PLDT 1. (8 points) Sunlight Essentials has provided us the following information: Management has discovered that its minimum cash balance should be P200,000 at all times. Interest rates on its existing marketable securities average 3.65% p.a. Cost per transaction is P500. Variance of its daily cash balance is P6,400,000,000. Assume 365 days in a year. Please answer the following questions. Make sure to show your solutions and to draw out the graph. a. The company's cash balance has increased to P700,000. Does the company need to do anything (buy marketable securities or sell marketable securities)? If yes, what should it do and by how much? b. The company's cash balance has increased to P1.200,000. Does the company need to do anything (buy marketable securities or sell marketable securities)? If yes, what should it do and by how much? 2. (6 points) You are the finance manager of Sunlight Essentials. One of your main targets is to optimize your company's cash balance to ensure that the company always has sufficient cash but at the same time is able to earn as much interest/gains as possible. You have been given the following marketable securities as investment options. Which of these would you have your company invest in and why? You may allocate percentages to all or some of these marketable securities (i.e. 50% to BPI Time Deposit / 50% to Philippine Tbill). Keep in mind that all these would have transaction costs so if you decide to invest in all of these securities in equal proportion, remember that your transaction costs would also be higher. Marketable Securities List: Short Term T-Bills US Tbills: 0.10% p.a. Argentinian Tbills: 15.83% p.a. Philippine Tbills: 1.52% p.a. Commercial Paper Phoenix Petroleum: 5% p.a. Time Deposit BPI: 0.25% p.a. Tanay Rural Bank: 4% p.a. Stocks Cebu Pacific PLDT
