The finance director of Chessington Inc. is reviewing their target c in light of their varying cash inflows. You decide that the Miller-Orr provide some useful guidelines. Given a lower cash balance leve standard deviation of monthly net cash flows of $700 and a mor rate of 0.5%. Transaction costs of switching from market securiti are $15 per transaction on average. I (a). Calculate the target cash balance. (b). Calculate the upper cash limit. (c). Calculate the average cash balance.
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- Furles Inc. has hired you as a consultant to analyze their cash management policy and suggest the most efficient parameters. They have estimated their current daily variance of net cash flow to be $75,00O. Their bank requires them to maintain a minimum compensating balance in their account of $2,000. They have negotiated a fixed transaction cost with their broker of $15 per transaction and they are currently able to earn an annual return of 5% on their investment in marketable securities. Compute their optimal cash balance target (C*), optimal upper bound (U*) and lower bound (L), as well as the average cash balance (ACB) that they will have on hand so that you can also tell them their annual opportunity cost of maintaining the average cash balance. C* = U* = L = ACB = Annual Opportunity Cost ($) = %3DThe management of the Keribels Company wishes to apply the Miller-Orr model to manage its cash investments. They have determined that the cost of either investing in or selling marketable securities is P 100. By looking at the Keribels Company's past cash needs, they have determined that the variance of daily cash flow is P 75,000. Keribels Company's opportunity cost of cash per day is 0.05%. Based on their experience the cash balance should not fall below P 50,000. WHAT IS THE RETURN POINT?(Use a number, no decimal value, no currency, no space, no commas) *The management of the Keribels Company wishes to apply the Miller-Orr model to manage its cash investments. They have determined that the cost of either investing in or selling marketable securities is P 100. By looking at the Keribels Company's past cash needs, they have determined that the variance of daily cash flow is P 75,000. Keribels Company's opportunity cost of cash per day is 0.05%. Based on their experience the cash balance should not fall below P 50,000. WHAT IS THE UPPER LIMIT? (Use a number, no decimal value, no currency, no space, no commas)
- The management of the Keribels Company wishes to apply the Miller-Orr model to manage its cash investments. They have determined that the cost of either investing in or selling marketable securities is P 100. By looking at the Keribels Company’s past cash needs, they have determined that the variance of daily cash flow is P 75,000. Keribels Company’s opportunity cost of cash per day is 0.05%. Based on their experience the cash balance should not fall below P 50,000. WHAT IS THE LOWER LIMIT? (Use a number, no decimal value, no currency, no space, no commas) *The management of the Keribels Company wishes to apply the Miller-Orr model to manage its cash investments. They have determined that the cost of either investing in or selling marketable securities is P 100. By looking at the Keribels Company’s past cash needs, they have determined that the variance of daily cash flow is P 75,000. Keribels Company’s opportunity cost of cash per day is 0.05%. Based on their experience the cash balance should not fall below P 50,000. WHAT IS THE UPPER LIMIT?Baumol Model and Miller-Orr Model 1. 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. Calculate the lower limit, the return point, and the upper limit based on the Miller-Orr model of cash management.
- 1. 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. Calculate the lower limit, the return point, and the upper limit based on the Miller-Orr model of cash management. 2. The Seminole Company wishes to apply the Miller-Orr model to manage its cash investment.…The following data applies to a company.1. The minimum cash balance is $8,000.2. The variance of daily cash flows is 4,000,000, equivalent to a standard deviation of $2,000 per day.3. The transaction cost for buying or selling securities is $50. The interest rate is 0.025 per cent per day.You are required to formulate a decision rule using the Miller-Orr model. A. What is the optimal cash return point? B.What is the upper cash limit?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. Calculate the lower limit, the return point, and the upper limit based on the Miller-Orr model of cash management.
- The A Company wishes to apply the Miller-Orr model to manage its cash investment. A's management has determined that the cost of either investing in or selling marketable securities is $200. By looking at A Company’s past cash needs, they have determined that the variance of daily cash flows is $10,000. A Company’s opportunity cost of cash, per day, is estimated to be 0.05%. A management has figured, based on their experience dealing with the cash flows of the company, that there should be a cushion— a safety stock—of cash of $20,000. Calculate the lower limit, the return point, and the upper limit based on the Miller-Orr model of cash management..You have recently been hired to improve the performance of MJ Cor., which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm's cash conversion cycle. Data gathered were as follows: Current inventory : P120,000 Annual sales : P600,000 Accounts receivable : P157,808 : P25,000 : P365,000 : net 30 days : net 50 days. Accounts payable Total annual purchases Purchases credit terms Receivables credit terms Using 365-day year, the estimated current cash conversion cycle (in days) is?Upon further investigation, you hare found that the amount of account payables for Companies A and X at the start of the year is 20,000 and 30,000, respectively. Apart from that, the amount of credit purchase for Companies A and Bis 250,000 and 280,000, respectively. Based on all this information, recommend on which company that gire lower risk to your company. The recommendation must be ustified by the following analysis:. a) Liquidity analysis. b) Solvency analysis. c) Any other financial analysis that you. think can help in making your decision. Table: Balance Sheet for Company A and Company B Assets 280,000 110,000 140,000 100,000 100,000 730,000 Fixed Assets Other Non-Current Assets 250,000 80,000 120,000 80,000 120,000 650,000 Account Receivables Inventory Cash ТОTAL Liabilities Capital Long Term Debt Account Payables Other Current Liabilities ТОTAL 250,000 120,000 160,000 120,000 650,000 280,000 140,000 180,000 130,000 730,00