Question
MSU's assistant treasurer wants to use the Baumol Model to determine the optimal cash transfer amount. The firm develops the following parameters: an annual opportunity
MSU's assistant treasurer wants to use the Baumol Model to determine the optimal cash transfer amount. The firm develops the following parameters: an annual opportunity cost is 12%, a fixed cost per securities transaction is $75, and total annual cash needs for the year is $5,000,000. What is the optimal cash transfer amount?
| a. | $7,472.14 | |
| b. | $79,056.94 | |
| c. | $65,325.27 | |
| d. | $6,324.55 |
What is the total annual cost (transaction and carrying costs) of the cash position?
| a. | $6324.58 | |
| b. | $3,162.29 | |
| c. | $4,743.42 | |
| d. | $9,486.83 |
Assume that the treasurer wants to use the Miller-Orr Model to determine the optimal transfer amount and has developed the following additional parameters: lower control limit = $5,000 and variance of daily cash flows = $5,000,000. What should the cash return level be?
| a. | $4,492.95 | |
| b. | $9,492.95 | |
| c. | $19,492.95 | |
| d. | $14,492.95 |
What is the optimal value of upper control limit?
| a. | $33,478.86 | |
| b. | $46,052.66 | |
| c. | $17,657.27 | |
| d. | $42,690.07 |
What is the average cash balance?
| a. | $14,492.95 | |
| b. | $21,506.95 | |
| c. | $19,283.27 | |
| d. | $17,657.27 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Valuation Workbook
Authors: James Hitchner, Michael J. Mard
1st Edition
0471220833, 978-0471220831
