Donaldson, Inc. spends $94,000 a week to pay bills and maintains a lower cash balance limit of $25,000. The standard deviation of the disbursements is $13,000. The applicable weekly interest rate is 0.045 percent and the fixed cost of transferring funds is $52. What is your optimal average cash balance based on the Miller-Orr model?
Cash balance target = $25,000 + [0.75 × $52 × ($13,0002/.00045)]1/3 = $49,466.94
Average cash balance = [(4 × $49,466.94) - $50,000]/3 = $57,623 |
84.
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The Burger Stop spends $52,000 a week to pay bills and maintains a lower cash balance limit of $60,000. The standard deviation of the disbursements is $7,500. The applicable weekly interest rate is 0.04 percent and the fixed cost of transferring funds is $50. What is your optimal average cash balance based on the Miller-Orr model?
Cash balance target = $60,000 + [0.75 × $50 × ($7,5002/.0004)]1/3 = $77,405.96
Average cash balance = [(4 × $77,405.96) - $60,000]/3 = $83,208 |
85.
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Your firm spends $48,000 a week to pay bills and maintains a lower cash balance limit of $50,000. The standard deviation of the disbursements is $8,100. The applicable weekly interest rate is 0.054 percent and the fixed cost of transferring funds is $65. What is your cash balance target based on the Miller-Orr model?
Cash balance target = $50,000 + [.75 × $65 × ($8,1002/.00054)]1/3 = $68,093
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86.
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Travel Inn Express spends $109,000 a week to pay bills and maintains a lower cash balance limit of $125,000. The standard deviation of the disbursements is $14,400. The applicable weekly interest rate is 0.039 percent and the fixed cost of transferring funds is $58. What is the inn's cash balance target based on the Miller-Orr model?
Cash balance target = $125,000 + [0.75 × $58 × ($14,4002/.00039)]1/3 = $153,492
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