A company disburses a total of Tsh 50,000,000 per year on cash. It costs Tsh 75...

 

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A company disburses a total of Tsh 50,000,000 per year on cash. It costs Tsh 75 on average every time securities are sold for cash. The treasury manager estimates that the variance of change in daily cash-flow balance is Tsh 20,000,000. He also establishes that the lower limit is Tsh 50,000. Required: i. Calculate the return point Calculate the upper cash limit if the current short term investment rate is 5%. A company disburses a total of Tsh 50,000,000 per year on cash. It costs Tsh 75 on average every time securities are sold for cash. The treasury manager estimates that the variance of change in daily cash-flow balance is Tsh 20,000,000. He also establishes that the lower limit is Tsh 50,000. Required: i. Calculate the return point Calculate the upper cash limit if the current short term investment rate is 5%.

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Answer To solve this problem we will use the Baumol model for cash management i Calculating the retu... View the full answer