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The variance of the daily cash flows for the Pele Bicycle Shop is $80,000. The firm has decided that the tolerable lower limit of its
The variance of the daily cash flows for the Pele Bicycle Shop is $80,000. The firm has decided that the tolerable lower limit of its cash holdings at any time is $10,000. The opportunity cost to the firm of holding cash is 5 percent per year. How would the companys target cash holdings change if the fixed cost of buying and selling securities decreases from $20,000 to $10,000?
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