1. Downing Consulting, Inc. is an independent political consulting agency that specializes in providing advice to members of parliament in the U.K. The business owner has determined that its operating circumstances are quite suitable for use of the Baumol-Tobin cash management model. The business consistently earns an annual rate of return of 4.0% on its marketable securities and requires a total of $7,500,000 in cash each year to maintain its level of operations. Transactions costs are $60 each time it is necessary to liquidate marketable securities. Assume a 365-day year.

Answer the following questions by filling in the blanks. Give your answers rounded to the nearest whole number in each case.

(a) What is the companys optimum cash order quantity? $.

(b) What is the optimum number of securities liquidations for cash per year? transactions.

(c) What is the optimum number of days between orders for cash? days.

(d) What is the minimum total cost associated with obtaining and maintaining cash balances? $

4.

Markerts Markets is a small privately-owned chain of grocery stores. The owner has determined that operating circumstances require the use of the Miller-Orr cash management model to manage the cash balances of the enterprise. The standard deviation of daily cash balances has been shown to be $6,000, and the owner believes this figure also reflects future balance variability. The enterprise earns an average daily return of 0.2% on its marketable securities and incurs an average brokerage fee of $250 each time it engages in a securities transaction. The owner has determined that it cannot permit the enterprises cash balance to fall below $25,000.

Answer the following questions by filling in the blanks. Give your answers rounded to the nearest whole number in each case.

(a) What is the companys z value? $.

(b) What is the companys return-to-point? $.

(c) What is the companys optimum maximum cash balance? $