Question
12. As the operator of a small and newly established restaurant you fear a slowdown might bankrupt your small business. To assess how much cash
12. As the operator of a small and newly established restaurant you fear a slowdown might bankrupt your small business. To assess how much cash reserves you need on hand you compile historical data of other restaurants in your area and adjust these figures to account for the peculiar cost accounting of your business. The result of this analysis is a frequency table of how many days out of 100 that you would need various levels of cash-reserves, this is presented in the table below:
Number of days | 40 | 35 | 21 | 3 | 1 |
---|---|---|---|---|---|
Cash requirement | $100 | $400 | $800 | $1200 | $1500 |
If you wish to be certain that at least 95% of the days you'll have enough cash on hand to meet any requirements, what level of cash reserves do you require?
[Please give your answer in dollars and pennies. For example if you compute the solution $1234.56789 please write 1234.57]
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