3. The Miller-Orr cash management model

Rozell Development, Inc. has determined that its operating circumstances require the use of the Miller-Orr cash management model to manage its cash balances. The standard deviation of the companys daily cash balances has been shown to be $2,000, and management feels this figure also reflects future balance variability. Rozell Development earns an average daily return of 0.05% on its marketable securities and incurs an average brokerage fee of $50 each time it engages in a securities transaction. Management has determined that it cannot permit the companys cash balance to fall below $5,000.

What is the companys z value?

What is the companys return-to-point?

What is the companys optimum maximum cash balance?

What is the optimum dollar value of marketable securities to be sold when the minimum cash balance is attained?

What is the dollar value of marketable securities to be purchased when the maximum cash balance is attained?