Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Optimal Cash Transfer Barenbaum Industries projects that cash outlays of $6.2 million will occur uniformly throughout the year. Barenbaum plans to meet its cash requirements

image text in transcribed

Optimal Cash Transfer Barenbaum Industries projects that cash outlays of $6.2 million will occur uniformly throughout the year. Barenbaum plans to meet its cash requirements by periodically selling marketable securities from its portfolio. The firm's marketable securities are invested to earn 15%, and the cost per transaction of converting securities to cash is $27. Assume a 365-day year. a. Use the Baumol model to determine the optimal transaction size for transfers from marketable securities to cash. Do not round intermediate calculations. Round your answer to the nearest dollar. C*= $ b. What will be Barenbaum's average cash balance? Do not round intermediate calculations. Round your answer to the nearest dollar. $ C. How many transfers per year will be required? Do not round intermediate calculations. Round your answer to the nearest whole number. transfers per year d. What will be Barenbaum's total annual cost of maintaining cash balances? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would the total cost be if the company maintained an average cash balance of $50,000? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would the total cost be if the company maintained an average cash balance of $0 (it deposits funds daily to meet cash requirements)? Do not round intermediate calculations. Round your answer to the nearest dollar $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Lords Of Finance The Bankers Who Broke The World

Authors: Liaquat Ahamed

1st Edition

0143116800, 978-0143116806

More Books

Students also viewed these Finance questions

Question

=+ d. What happens to Oceanias trade balance?

Answered: 1 week ago