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LXA and LXB are two business units which form one larger organisation. Both units have prepared cash flow forecasts for next year. The cash flow
LXA and LXB are two business units which form one larger organisation. Both units have prepared cash flow forecasts for next year. The cash flow forecasts indicate a cash surplus at LXA. LXA does not earn any interest on its cash balance but does also holds investments yielding 11% which can't be increased but can be sold. LXB forecasts a cash deficit which is smaller than the surplus at LXA and could be funded by an overdraft charging interest at 10%. Both business units have been offered a new opportunity to invest externally which would deliver a return of 9%. Which of these is the most profitable option in the short-term? Solution A.Sell LXA's investments to eliminate the cash deficit at LXB. B.Use the cash surplus at LXA to eliminate the cash deficit at LXB. C.Use the cash surplus at LXA to invest in the new external opportunity. D.Sell LXA's investments to invest in the new external opportunity
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