XYZ limited maintains a minimum cash balance of shs. 500,000. The standard deviation of the companys daily cash changes is shs. 200,000. The annual interest rate is 14%. The transaction cost of buying or selling securities is shs. 150 per transaction. Using Miller Orr cash management model determine the following:

The upper cash limit (2 marks)

The average cash balance (2 marks)

The return point (3 marks)

Give the decision rule (2 marks)

Explain the reasons as to why a company should pay dividends. (6 marks)