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X has started a new manufacturing business, and he is having trouble deciding between how much cash to hold and how much funds to maintain
X has started a new manufacturing business, and he is having trouble deciding between how much cash to hold and how much funds to maintain in marketable securities. In other words, the manager is looking for an optimal cash transfer amount based on the Baumol model of cash management. Bandmembers are suggesting a transfer amount of $69,000, whereas a young analyst is suggesting a transfer amount of about $79,000. Additional required information - - Annual cash requirement/disbursement is 5,000,000. - The investment broker charges 75S per securities transaction. - Short-term investment interest rates are 12%. Based on the information, decide which of the transfer amount will be best for the manager, and what will be the total cost associated with the best option. X has started a new manufacturing business, and he is having trouble deciding between how much cash to hold and how much funds to maintain in marketable securities. In other words, the manager is looking for an optimal cash transfer amount based on the Baumol model of cash management. Bandmembers are suggesting a transfer amount of $69,000, whereas a young analyst is suggesting a transfer amount of about $79,000. Additional required information - - Annual cash requirement/disbursement is 5,000,000. - The investment broker charges 75S per securities transaction. - Short-term investment interest rates are 12%. Based on the information, decide which of the transfer amount will be best for the manager, and what will be the total cost associated with the best option
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