Allstar Inc. is considering a lockbox system that would reduce its float by three days. An expected $500$ collections per day will be made to the lockbox with an average payment size of $$1,000.$ The bank's charge for operating the lockboxes is $$\mathrm{.}30$ per cheque. The interest rate is $\mathrm{.}015$ percent per day. How much will Allstar save per day by having the lockbox?

Multiple Choice

$-$$$75$

$$150$

$$75$

$$0$

$$225$

SML Co$.$ has established a lower limit with regard to its cash balance holdings of $$10,000.$ Its daily cash flows have a standard deviation of $$5,000.$ The annual interest rate on marketable securities is $8$ percent. The fixed cost per transaction of buying and selling securities is $$12.$ Calculate the target cash balance.

Multiple Choice

$$10,000$

$$11,883$

$$11,412$

$$14,236$

$$17,746$

The Trektronics store begins each week with $162$ phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $$26$ per year and the fixed order cost is $$50.$ What is the optimal order quantity?

Multiple Choice

$127$ phasers

$66$ phasers

$94$ phasers

$180$ phasers

$25$ phasers

Zoo Corp. has a chequing account ledger balance of $$41,000,$ and after calling the bank, found that the bank balance was $$47,000.$ A deposit of $$5,000$ was made this morning and has not yet been credited by the bank. What is the value of the cheques outstanding or payment float?

Multiple Choice

$$6,000$

$-$$$1,000$

$$11,000$

$$1,000$

$$5,000$

Which of the following is false?

Multiple Choice

Checks written by the firm generate payment float

All of the answers are false.

An objective of float management is to speed up the availability float

Float management will succeed if the firm can collect late and pay early

The difference between a bank's ledger balance and the firm's ledger balance is called float

A firm has a lower limit cash balance of $$200$ with a standard deviation of $$50.$ The fixed cost per transaction is $$8$ and the interest rate per period is $0\mathrm{.}5\%.$ What is the target cash balance?

Multiple Choice

$$134$

$$292$

$$444$

$$344$

$$97$

A firm has a lower limit cash balance of $$200$ with a standard deviation of $$50.$ The fixed cost per transaction is $$8$ and the interest rate per period is $0\mathrm{.}5\%.$ What is the average cash balance?

Multiple Choice

$$152$

$$192$

$$227$

$$87$

$$134$

As order size increases the total annual order costs:

Multiple Choice

Is in determinant

Stays the same

Increases

Is always equal to the total carrying costs

Decreases

safety stocks of an inventory item should be carried when:

Multiple Choice

demand or lead time is uncertain.

fluctuation in demand is known with certainty.

the lead time for delivery is known, certain, and non$-$zero.

demand or lead time is certain.

inventory can be ordered and received without delay

When interest rates are high:

Multiple Choice

In determinant

Hold smaller average cash balances

Has no effect on the average cash balance

Holding larger cash balances is always a bad idea

Hold larger average cash balances

AU Corp. is considering a lockbox system that would reduce its float by two days. Collections average $$125,000$ per day. The interest rate is $6$ percent per year and the bank charges $$10$ per day for the lockbox system. How much will AU Corp. save per day by having the lockbox?

Multiple Choice

$$31\mathrm{.}10$

$$51\mathrm{.}10$

$$10\mathrm{.}55$

$$41\mathrm{.}10$

$$20\mathrm{.}55$

MJK Co$.$ has established a lower limit with regard to its cash balance holdings of $$500.$ Its daily cash flows have a standard deviation of $$200.$ The annual interest rate on marketable securities is $5$ percent. The fixed cost per transaction of buying and selling securities is $$10.$ Calculate the target cash balance.

Multiple Choice

$$800$

$$743$

$$1,045$

$$500$

$$682$

One reason why firms hold cash is in anticipation of taking advantage of unforeseen opportunities. This is called:

Multiple Choice

meeting transaction needs.

hedging against uncertainty.

the liquidity requirement.

arbitrage.

Speculation

The target cash balance should be located:

Multiple Choice

one$-$third of the distance from the lower to the upper limit$.$

halfway between the upper and lower limits$.$

at the upper limit$.$

one$-$third of the distance from the upper to the lower limit$.$

at the lower limit$.$

A firm has a lower limit cash balance of $$200$ with a standard deviation of $$50.$ The fixed cost per transaction is $$8$ and the interest rate per period is $0\mathrm{.}5\%.$ What is the upper cash limit$?$

Multiple Choice

$$511$

$$901$

$$385$

$$484$

$$632$

A firm uses the Miller$-$Orr model with a minimum balance of $$170,$ a maximum of $$375$ and a target balance of $$290.$ If the cash balance hits $$450,$ what will the firm do$?$

Multiple Choice

Buy $$75$ in marketable securities

Buy $$205$ in marketable securities

Sell $$160$ in marketable securities

Sell $$75$ in marketable securities

Buy $$160$ in marketable securities