Question: Optimal Cash Transfer
Barenbaum Industries projects that cash outlays of $3.5 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 11%, and the cost per transaction of converting securities to cash is $24. (Do not round your intermediate calculations.)
Use the Baumol model to determine the optimal transaction size for transfers from marketable securities to cash. Round your answer to the nearest whole dollar. $
What will be Barenbaum's average cash balance? Round your answer to one decimal place. $
How many transfers per year will be required? Round your answer to the nearest whole number. One approximately every days.
What will be Barenbaum's total annual cost of maintaining cash balances? Round your answer to the nearest whole dollar. Assume a 360-day year. $
What would the total cost be if the company maintained an average cash balance of $65,000? Round your answer to the nearest whole dollar. Assume a 360-day year.
What would the total cost be if the company maintained an average cash balance of $0 (it deposits funds daily to meet cash requirements)? Round your answer to the nearest whole dollar. Assume a 360-day year. $