Northern Corporation has two dates where it receives cash inflows: June 15 and November 15. On each of this dates, it expects to receive P80 million. Cash expenditures are expected to be steady throughout. Presently, the return on investment in marketable securities is 8% per annum an the cost per transfer from securities to cash is P125 each time a transfer occur.

Required:

1. What is the optimal transfer size using Baumol's EOQ model?

2. What is the average cash balance?

3. What is the total relevant cost of the optimum cash balance?

4. Number of cash transfer per year.

5. What would be your answer if the return on investment is 12% per annum and the transfer cost is P75.