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5. Assume that interaffiliate cash flows are uncorrelated with one another. Assume that each affiliate will have to make all planned payments before it receives

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5. Assume that interaffiliate cash flows are uncorrelated with one another. Assume that each affiliate will have to make all planned payments before it receives any cash. Under a conservative policy, 3 times of S.D. cash for precautionary purpose as the sufficient cash to cover 99.87% of transactions under either decentralized system or centralized system. Affiliate Expected Receipts Expected Disbursements Standard Deviation U.S. $100,000 $140,000 $40,000 Germany $150,000 $135,000 $60,000 Mexico $175,000 $125,000 $30,000 Japan $200,000 $130,000 $70,000 a. Calculate the sufficient amount of cash for precautionary purpose 1) by the centralized depository. (8 pts) b. Calculate the sufficient amount of cash for precautionary purpose if depository system is decentralized. (8 pts) c. Can you confirm that the centralized depository is more beneficial to the company? If so, How? (4 pts) 5. Assume that interaffiliate cash flows are uncorrelated with one another. Assume that each affiliate will have to make all planned payments before it receives any cash. Under a conservative policy, 3 times of S.D. cash for precautionary purpose as the sufficient cash to cover 99.87% of transactions under either decentralized system or centralized system. Affiliate Expected Receipts Expected Disbursements Standard Deviation U.S. $100,000 $140,000 $40,000 Germany $150,000 $135,000 $60,000 Mexico $175,000 $125,000 $30,000 Japan $200,000 $130,000 $70,000 a. Calculate the sufficient amount of cash for precautionary purpose 1) by the centralized depository. (8 pts) b. Calculate the sufficient amount of cash for precautionary purpose if depository system is decentralized. (8 pts) c. Can you confirm that the centralized depository is more beneficial to the company? If so, How? (4 pts)

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