What the cash return level be according to the baumol model

Assignment Help Financial Accounting

Reference no: EM13907038

The assistant treasurer of Monroe Tires. INC is trying to determine what the appropriate cash return level should be. The company's cash balances have been fluctuating widely because of unpredictable and wide-ranging receipts and disbursements. The best estimate of annual disbursements is 5,000,000. The investment broker charges 75$ per securities transaction. Short-term investment interest rates are 12%. The company does not mind a 0$ cash balance but does not want the balance to be negative.

a) What the cash return level be, according to the Baumol Model?

b) What will the average cash balance be if the company's cash outflows fit the assumptions of the Baumol Model?

c) How many security sales will Monroe have in a year, assuming the model's assumptions are valid?

d) WHAT will the total period costs be for a year?

e) Do you recommend that monroe uses the baumol model? Why or why not?

Reference no: EM13907038

Questions Cloud

Expository essay explaining the relative contents : Write a 1-2 page double-spaced expository essay explaining the relative contents (i.e. as it relates to the thesis of your final paper) of the resource and submit it in APA format.

How real estate transactions are closed : Contact a title company or settlement attorney online or by phone. Get basic information on how the company works, how real estate transactions are closed, what the costs are, and so on

What are you trying to accomplish? : What are you trying to accomplish?

Is there any equilibrium in which no player uses a action : Finally profiles in which the winner obtains three or more votes more than the loser.) Is there any equilibrium in which no player uses a weakly dominated action?

What the cash return level be according to the baumol model : The assistant treasurer of Monroe Tires. INC is trying to determine what the appropriate cash return level should be. The company's cash balances have been fluctuating widely because of unpredictable and wide-ranging receipts and disbursements. What..

Overflow in a traditional data type : Wrap around and continue the cancellation until only one element remains. As the Fibonacci number will overflow in a traditional data type, take modulus of the number with 1000000007.

What should be the quantity sold : The company believes that the price elasticity for this product is about -2.5. If it decreases its price to $63, what should be the quantity sold? Will the revenue increase? Why

Walker company prepares monthly budgets : Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 30,000 units.

Convertible bonds when the market rate of interest : On January 1 2015 Acme company issued 100 ($1000 par) 6 % semi-annual 9 year convertible bonds when the market rate of interest was 8 %. make the journal entry on 1/1/15 when acme issued the bonds

User Account

All Pages