Barenbaum Industries projects that cash outlays of $4.5 million

Question # 00622386 Posted By: katetutor Updated on: 11/27/2017 08:30 AM Due on: 11/27/2017
Subject Finance Topic Finance Tutorials:
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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)?

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  1. Tutorial # 00621121 Posted By: katetutor Posted on: 11/27/2017 08:30 AM
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