(a) ABC maintains a minimum cash balance of Sh.500,000. The standard deviation of the company's daily cash changes is Sh.200,000. The annual interest rate is 14%. The transaction cost of buying or selling securities is Sh. 150 per transaction. (Assume 365 days in a year) Required: Using Miller-Orr cash management model determine the following: (i) (11) The upper cash limit. The average cash balance. The return point. Give the decision rule. (3 Marks) Companies A and B are identical in every respect except that A is ungeared while B is geared. Assume that you are given the following information concerning the two companies: A 10,000 (iii) (iv) (b) EBIT 5% debt interest EBT Ke 10,000 10% B 10,000 1,500 (2 Marks) (2 Marks) (3 Marks) 8,000 10% Required: Using M&M without taxes, answer the following questions: (4 Marks) (1) Determine the current market value of the 2 firms. (ii) (6 Marks) Determine how an investor who owns 10% in any of the two firms will practice the arbitrage process.