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- ABC Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. ABC has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. What is the optimal cash conversion size? A.P60,000B.P45,000C.P55,000D.P72,500C. Exodus Corp. is analyzing the performance of its cash management. On the average, the firm holds inventory 65 days, pays its suppliers in 35 days, and collects its receivables in 15 days. The firm has a current annual outlay of P1,960,000 on operating cycle investments. Exodus currently pays 10 percent for its negotiated financing. (Assume a 360-day year.) Calculate the following: a. Cash conversion cycle b. Operating cycle. c. Daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days.mekmek Corporation uses the Baumol Cash Model to determine its optimal cash balance. For the coming year, the expected cash disbursement total to P432,000. The interest rate on marketable securities is P8 per transaction. Using 5% carrying cost rate, what is the optimal cash balance of the company? A. 1,175.76 B. 5,878.78 C. 11,757.55 D. 142,000
- Simile Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. What is the Total Opportunity Cost of keeping cash in the bank?Simile Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. What is the Total Conversion Cost?CASE 3 Pinocchio Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. Required: 1. Compute for the optimal cash conversion size. 2. Determine the average cash balance. 3. Determine the number of transactions. 4. How much is the total holding cost? 5. How much is the total transaction cost? 6. How much is the total cost of cash? 7. What will be your advice to the management?
- XYZ have estimated free cash flows of P2,200,000 on year 5 and assumes that the company’s cash flow will grow by 3% per year. Using discount rate of 11%, what is the terminal value?Lux Co. has a total annual cash requirement of P9,030,000 which are to be paid uniformly. Lux has the opportunity to invest the money at 21% per annum. The company spends, on the average, P30 for every cash conversion to marketable securities. What is the optimal cash conversion size?PROBLEM Buccaneer, Inc., has determined that it needs $10 million in cash per week. If Buccaneer needs additional cash, it can sell marketable securities, incurring a fee of $100 for each transaction. If Buccaneer leaves funds in its marketable securities, it expects to earn approximately 0.2% per week on their investment. 1. How much is the weekly opportunity cost of cash? (Use a number, must be in decimal form. eg. 6.3%/100, encode 0.063 , no commas, no currency, no space) * 2. How much is the total demand for cash per week? (Use a number, no decimal value, no commas, no currency, no space) * 3. How much is the cost per transaction? (Use a number, no decimal value, no commas, no currency, no space) * 4. Using the Baumol Model, how much cash should Buccaneer raise from selling securities each week to minimize its costs of cash? (Use a number, no decimal value, no commas, no currency, no space) * PLEASE ANSWER ALL QUESTIONS. THANK YOU
- CASE 3 Pinocchio Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. Required: Please solve 4-7 4. How much is the total holding cost? 5. How much is the total transaction cost? 6. How much is the total cost of cash? 7. What will be your advice to the management?6. Your firm, ABC Berhad, has a payable account amount of SGD1,000,000 in 3 months. Your company is considering hedging the cash flows. Your firm analysts prepare the following information. : MYR3.0950/SGD; MYR3.0960/SGD : 100;200 Spot rate 90-day forward rate 90-day interest rate in Malaysia : 8%; 9% per annum 90-day interest rate in Singapore : 3%; 4% per annum 90-day options : Exercise price: MYR3.0952 (Call premium: MYRO.0350/SGD; Put premium: MYRO.0450/SGD) Scenario First Second Third Table 1: Forecasted future spot exchange rate in 90 days Forecasted future spot exchange MYR3.0950/SGD MYR3.0952/SGD MYR3.1000/SGD a. If your firm decides to hedge the foreign exchange risk exposure, state the strategy you will use for the following alternative strategies: 1 a forward hedge il. an option hedge b. Calculate the expected net value in Malaysian Ringgit (MYR) of your firm cash flow in 3 months for each of the possible future spot rates as in Table 1 for each alternative strategy in (a).…4. Sovereign-Tea Company projected to make even monthly cash payments of P150,000 during the year. The average return on money market placements is eight percent per annum and payment for cash transfer is expected to be P250 per transaction. Determine the total relevant cost using the Baumol Model.