1.XYZ ltd maintains a minimum cash balance of sh. 500,000. The standard deviation of daily cash changes...

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1.XYZ ltd maintains a minimum cash balance of sh. 500,000. The standard deviation of daily cash changes is sh. 200,000. The annual interest rate is 14%. The transaction cost of buying or selling securities is sh. 150 per transaction. Using miller-Orr cash management model determine the upper cash limit, the average cash balance, the target cash limit and the decision rule.

2.Assume you are provided the following information concerning 2 companies A and B:

A. B

EBIT. 10,000. 10,000

5% interest. 0. 1500

EBT. 10,000. 8,500

Ke. 8% 11%

Determine the value of the two firms. Assume that an investor owns 10% in any of the two firms. Determine how he will practice the arbitrage process.

Posted Date: May 18, 2024 09:02 PM

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1.XYZ ltd maintains a minimum cash balance of sh. 500,000. The standard deviation of daily cash changes...

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