B plc currently uses the Baumol model for managing its cash balances The minimum cash balance held

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B plc currently uses the Baumol model for managing its cash balances The minimum cash balance held on its current account is $5,000 Cash balances surplus to the company's needs are placed in an investment account which earns a return of 8 per annum Transaction costs for transferring balances into and out of the investment account is fixed at $20 per transaction It has been estimated that the current account standard deviation is $4,200 per day Discuss how the MillerOrr model overcomes the problems associated with the Baumol model and calculate the spread, maximum cash balance and the return point Include in your answer an explanation of how the MillerOrr model works?

Posted Date: Dec 14, 2021 02:55 PM

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B plc currently uses the Baumol model for managing its cash balances The minimum cash balance held

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The MillerOrr model overcomes the problems associated with the Baumol model by providing a way to op... View the full answer

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