Explain with reference to the strategies available to the firm for financing its working capital.

 

A company has set the minimum cash balance at Sh.10, 000. The interest rate on marketable able securities is 9% p.a. standard deviation of daily cash flows is sh.2500 and transaction costs. For every sale or purchase of marketable securities is sh. 20.

 

Assume a 360 days' year.

 

Required:

(i) Compute the target cash balance.

(ii) Compute the upper-limit, average cash

(iii) State the company's cash decision rule.