(28-2) Optimal Cash Transfer
Barenbaum Industries projects that cash outlays of $4.5 million will occur uniformly throughout the year. Barenbaum plans to meet its cash requirements by periodically selling marketable securities from its portfolio. The firm's marketable securities are invested to earn 12%, and the cost per transaction of converting securities to cash is $27.
a. Use the Baumol model to determine the optimal transaction size for transfers from marketable securities to cash.
b. What will be Barenbaum's average cash balance?
c. How many transfers per year will be required?
d. What will be Barenbaum's total annual cost of maintaining cash balances? What would the total cost be if the company maintained an average cash balance of$50,000 or of $0 (it deposits funds daily to meet cash requirements)?
Recently Asked Questions
- Please refer to the attachment to answer this question. This question was created from Jobs.
- Sweet treats common stock is currently priced at $36.72 a share. The company just paid $2.18 per share as its annual dividend. The dividends have been
- All of the following will cause a shift in the supply of portable power banks EXCEPT A. a decrease in the number of portable power banks manufacturers. B. an