A company faces a fixed cost of $4000 to obtain new funds. There is a requirement for $24000 of cash over each period of one year for the foreseeable future .The interest cost of new funds is 12% per year. The interest rate earned on short term securities is 9% per annum .How much finance company should raise at a time?  

The following data is of a company.

The minimum cash balance is $8000 and the variance of daily cash flows is 4000000 equivalent to a standard deviation of 2000 per day .The transaction cost for buying or selling securities is $50.The interest rate is 0.025% per day. Formulate a decision rule using Miller-Orr model.

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For the first question Lets assume that the company uses the raised funds immediately and needs to m... View the full answer