QUESTION 3 3.1.Use the information provided below to answer the following questions. INFORMATION Johannesburg-based Ndebele Textiles (NT) sources and retails exotic fabrics for sale in South Africa and internationally.NTis planning to set up an office in the USA due to significant growth in demand from North America. The office will initially be loss making while sales continue to grow but is considered to be a longterm investment by NT. It is anticipated that the USA office will need $500,000 finance per annum, evenly over the year. Head office intends to provide this finance by periodically selling investments in marketable securities held. The investments currently earn an average return of 5% per annum and each transaction to sell investments incurs a fixed fee of $100. Any spare cash would earn 1% per annum in a short-notice savings account. Required:	(20 Marks)
3.1.1. Using the Baumol model, calculate the dollar amount of investments that should be sold each time, and how often transfers would be needed.	(6 marks)
3.1.2. Calculate the total cost associated with Ndebele Textiles' cash management regime.	(5 marks)
3.1.3. Discuss THREE limitations of the Baumol model in cash management that the management of Ndebele Textile should consider. 3.2.Study the information provided below and answer the following questions. INFORMATION As the management accountant of VGK Enterprises, you have received the following credit terms from two existing suppliers: supplier A is prepared to offer terms of 2/10 net 50 and supplier B has terms of 3/10 net 80. VGK Enterprises currently operates an overdraft facility at an interest rate of 17% per annum. Required:	(3 marks)
3.2.1. Calculate the costs of not accepting the cash discount offered by the two suppliers (round off answers to two decimal places).	(4 marks)
3.2.2. Based on the results of the analysis in 3.2.1, what should be VGK Enterprise' response to the credit terms offered by the two suppliers?	(2 marks)

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311 Using the Baumol model calculate the dollar amount of investments that should be sold each time and how often transfers would be needed In the Baumol model the optimal cash transfer CT can be calc... View the full answer