Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The assistant treasurer of Jackson Tires, Inc., is trying to determine what the appropriate cash return level should be. The company's cash balances have been

image text in transcribed
The assistant treasurer of Jackson Tires, Inc., is trying to determine what the appropriate cash return level should be. The company's cash balances have been fluctuating wildly because of unpredictable and wide-ranging receipts and disbursements. The best estimate of annual disbursements is $5,000,000. The investment broker charges $75 per securities transaction. Short-term investment interest rates are 8%. The company does not mind a $0 cash balance but does not want the balance to be negative. Use the Baumol model to determine the following: Note: you must round all of your answers to nearest whole number AND properly identify your output for a correct mark. a. The optimal cash transfer amount b. The total cost of the cash position C. The number of annual transactions

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

The Theory And Practice Of Investment Management

Authors: Frank J Fabozzi, Harry M Markowitz

2nd Edition

0470929901, 9780470929902

More Books

Students also viewed these Finance questions

Question

Define apparent and actual authority.

Answered: 1 week ago