Rosie O'Grady's spends $115,000 a week to pay bills and maintains a lower cash balance limit of $95,000. The standard deviation of the disbursements is $14,600. The applicable interest rate is 4.8 percent and the fixed cost of transferring funds is $50. What is this firm's total cost of holding cash based on the BAT model?
Trading cost = [52/($111,616.90/$115,000)] × $50 = $2,678.81 Total cost = $2,678.81 + $2,678.81 = $5,358 |
80.
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Your firm spends $346,000 a week to pay bills and maintains a lower cash balance limit of $150,000. The standard deviation of your disbursements is $28,700. The applicable interest rate is 5 percent and the fixed cost of transferring funds is $60. What is your optimal average cash balance based on the BAT model?
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81.
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The Cow Pie Spreader Co. spends $214,000 a week to pay bills and maintains a lower cash balance limit of $150,000. The standard deviation of the disbursements is $16,000. The applicable weekly interest rate is 0.025 percent and the fixed cost of transferring funds is $49. What is the firm's cash balance target based on the Miller-Orr model?
Cash balance target = $150,000 + [0.75 × $49 × ($16,0002/.00025)]1/3 = $183,511
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82.
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The Blue Moon Hotel and Spa spends $359,000 a week to pay bills and maintains a lower cash balance limit of $250,000. The standard deviation of the disbursements is $46,800. The applicable weekly interest rate is 0.045 percent and the fixed cost of transferring funds is $60. What is the hotel's optimal upper cash limit based on the Miller-Orr model?
Cash balance target = $250,000 + [0.75 × $60 × ($46,8002/.00045)]1/3 = $310,278.70
Upper cash limit = 3 × $310,278.70 - (2 × $250,000) = $430,836 |
