Question: Bessons Brass, Inc. makes customized wind instruments for symphony orchestras, including trumpets, trombones, flutes, and clarinets. The manufacturer has determined that operating circumstances require the
Bessons Brass, Inc. makes customized wind instruments for symphony orchestras, including trumpets, trombones, flutes, and clarinets. The manufacturer has determined that operating circumstances require the use of the Miller-Orr cash management model to manage the cash balances of the enterprise. The standard deviation of daily cash balances has been shown to be $24,000, and management believes this figure also reflects future balance variability. The manufacturer earns an average daily return of 0.1% on its marketable securities and incurs an average brokerage fee of $500 each time it engages in a securities transaction. Management has determined that it cannot permit the companys cash balance to fall below $75,000.
Answer the following questions by filling in the blanks. Give your answers rounded to the nearest whole number in each case.
(a) What is the companys z value? $Blank 1.
(b) What is the companys return-to-point? $Blank 2.
(c) What is the companys optimum maximum cash balance? $Blank 3.
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