A company has the following cash flow pattern. Month Cash inflows (R) January February March April...
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A company has the following cash flow pattern. Month Cash inflows (R) January February March April May June July August September October November December 800 000 750 000 1 000 000 950 000 700 000 800 000 750 000 950 000 900 000 900 000 900 000 1 050 000 Cash outflows (R) 1 000 000 1 050 000 1 200 000 1 150 000 950 000 1 000 000 975 000 1 150 000 1 050 000 1 075 000 1 100 000 1 200 000 The company can earn 6% on marketable securities. Transaction cost incurred every time cash is converted is R55. Required: a) Determine the cash requirement for the 12 months. b) Calculate the optimal cash transfer amount to be converted. (Make use of Baumol model) c) How often does this amount need to be converted to cash? (3) (5) A company has the following cash flow pattern. Month Cash inflows (R) January February March April May June July August September October November December 800 000 750 000 1 000 000 950 000 700 000 800 000 750 000 950 000 900 000 900 000 900 000 1 050 000 Cash outflows (R) 1 000 000 1 050 000 1 200 000 1 150 000 950 000 1 000 000 975 000 1 150 000 1 050 000 1 075 000 1 100 000 1 200 000 The company can earn 6% on marketable securities. Transaction cost incurred every time cash is converted is R55. Required: a) Determine the cash requirement for the 12 months. b) Calculate the optimal cash transfer amount to be converted. (Make use of Baumol model) c) How often does this amount need to be converted to cash? (3) (5) A company has the following cash flow pattern. Month Cash inflows (R) January February March April May June July August September October November December 800 000 750 000 1 000 000 950 000 700 000 800 000 750 000 950 000 900 000 900 000 900 000 1 050 000 Cash outflows (R) 1 000 000 1 050 000 1 200 000 1 150 000 950 000 1 000 000 975 000 1 150 000 1 050 000 1 075 000 1 100 000 1 200 000 The company can earn 6% on marketable securities. Transaction cost incurred every time cash is converted is R55. Required: a) Determine the cash requirement for the 12 months. b) Calculate the optimal cash transfer amount to be converted. (Make use of Baumol model) c) How often does this amount need to be converted to cash? (3) (5) A company has the following cash flow pattern. Month Cash inflows (R) January February March April May June July August September October November December 800 000 750 000 1 000 000 950 000 700 000 800 000 750 000 950 000 900 000 900 000 900 000 1 050 000 Cash outflows (R) 1 000 000 1 050 000 1 200 000 1 150 000 950 000 1 000 000 975 000 1 150 000 1 050 000 1 075 000 1 100 000 1 200 000 The company can earn 6% on marketable securities. Transaction cost incurred every time cash is converted is R55. Required: a) Determine the cash requirement for the 12 months. b) Calculate the optimal cash transfer amount to be converted. (Make use of Baumol model) c) How often does this amount need to be converted to cash? (3) (5)
Expert Answer:
Answer rating: 100% (QA)
a To determine the cash requirement for the 12 months calculate the net cash flow for each month by subtracting the cash outflows from the cash inflow... View the full answer
Related Book For
Management Accounting
ISBN: 9780077185534
6th Edition
Authors: Will Seal, Carsten Rohde, Ray Garrison, Eric Noreen
Posted Date:
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