Question
The All Day Company is currently holding $690,000 in cash. It projects that over the next year its cash outflows will exceed cash inflows by
The All Day Company is currently holding $690,000 in cash. It projects that over the next year its cash outflows will exceed cash inflows by $140,000 per month.
a. How much of the current cash holdings should be retained?
b. and how much should be used to increase the companys holdings of marketable securities?
Each time these securities are bought or sold through a broker, the company pays a fee of $250. The annual interest rate on money market securities is 3.2 percent.
c. After the initial investment of excess cash, how many times during the next 12 months will securities be sold?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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