A treasury manager is assessing the annual performance of the firms short-term investment

portfolio. The beginning value of the portfolio was $5,200,000. At year-end, the portfolio was

valued at $5,350,000. No investments were purchased over the year as revenues and cash flows

dropped, which made it difficult to accumulate additional cash holdings.

a. What is the annual rate of return on the short-term investment portfolio?

b. What would the annual rate of return be if the ending value equaled $5,100,000?

c-

Fill in the missing cells in the following cash budget. Explain the implications of the calculated

net cash flows.

Cash Budget

ITEM SEPT. OCT. NOV.

Cash receipts ? $900 $800

Cash disbursements $300 $450 ?

= Net cash flow s $200 ? $300

+ Beginning cash ? ? ?

= Ending cash $235 ? ?

d-

The treasury manager of BRONCO, Inc. is contemplating whether to transfer funds using a

wire transfer or an EDT. The wire will cost $20, and the EDT will cost $0.75. The wire will

provide available funds in 1 less day than an EDT. The treasury manager believes that the

firms current investment opportunity rate is 8%. The firm does not currently earn earnings

credits on account balances. What is the minimum transfer balance that justifies a wire

transfer?