Chapter_27

# Chapter_27 - Chapter 27 Problems 1-21 Input boxes in tan...

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Chapter 27 Problems 1-21 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak and "Solver Add-In."

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Chapter 27 Question 1 Input Area: Increase I Decrease D No change N Output Area: a. D: this will lower the trading costs, which will cause a decreas b. D: this will increase the holding costs, which will cause a decr c. I: this will increase the amount of cash that the firm has to hol accounts, so they will have to raise the target cash balance to d. D: if the credit rating improves, then the firm can borrow easie cash balance and borrow if a cash shortfall occurs. e. I: if the cost of borrowing increases, the firm will need to hold cash shortfalls as the borrowing costs become more prohibitiv f. D: this depends somewhat on what the fees apply to, but of d compensating balance may be lowered, thus lowering the tar hand, fees are charged to the number of transactions, then th cash balance so they are not transferring money into the acco

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se in the target cash balance. rease in the target cash balance. ld in non-interest bearing o meet this requirement. ier, allowing it to lower the target more cash to protect against ive. direct fees are established, then the rget cash balance. If, on the other he firm may wish to hold a higher ount as often.
Chapter 27 Question 2 Input Area: Annual interest rate 7% Fixed order cost \$10 Total cash needed \$5,000 Output Area: C* \$1,195.23 The initial balance should be \$1,195.23 , and whenever the balance drops to \$0, another \$1,195.23 should be transferred in.

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Question 3 Input Area: Avg. daily cash balance \$400 Total cash needed \$25,000 Interest rate 5% Replenishing cost \$6 Output Area: Holding cost \$20.00 Trading cost \$187.50 Total cost \$207.50 C* \$2,449.49 They should increase their average daily
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Chapter_27 - Chapter 27 Problems 1-21 Input boxes in tan...

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