The management of the Book Warehouse Company wishes to apply the Miller-Orr model to manage its cash investment. They have determined that the cost of either investing in or selling marketable securities is $100. By looking at Book Warehouse’s past cash needs, they have determined that the variance of daily cash flows is $20,000. Book Warehouse’s opportunity cost of cash, per day, is estimated to be 0.03%. Based on experience, management has determined that the cash balance should never fall below $10,000. 1. How much is the cost per transaction?(Use a number, no decimal value, no commas, no currency, no space) * 2. How much is the return point based on the Miller-Orr model of cash
PROBLEM
The management of the Book Warehouse Company wishes to apply the Miller-Orr model to manage its cash investment. They have determined that the cost of either investing in or selling marketable securities is $100. By looking at Book Warehouse’s past cash needs, they have determined that the variance of daily cash flows is $20,000. Book Warehouse’s opportunity cost of cash, per day, is estimated to be 0.03%. Based on experience, management has determined that the cash balance should never fall below $10,000.
1. How much is the cost per transaction?(Use a number, no decimal value, no commas, no currency, no space) *
2. How much is the return point based on the Miller-Orr model of cash management? (Use a number, no decimal value, no commas, no currency, no space) *
3. How much is the upper limit based on the Miller-Orr model of cash management?(Use a number, no decimal value, no commas, no currency, no space) *
PLEASE ANSWER ALL QUESTIONS. THANKS!
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