A firm requires Rs. 20 million in cash for meeting its transaction needs over the next four
Fantastic news! We've Found the answer you've been seeking!
Question:
A firm requires Rs. 20 million in cash for meeting its transaction needs over the next four months, its planning horizon for liquidity decisions. It currently has the amount in the form of marketable securities that earn 12 percent annual yield. The cash payments will be made evenly over the planning period. The conversion of marketable securities into cash entails a fixed cost of Rs. 900 per transaction. What is the optimal conversion size as per Baumol model?
Related Book For
Corporate Finance
ISBN: 9781260772388
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date: