Champions Inc. consumes cash at a rate of $1,000 per day. Each time they sell securities for cash it costs them $50. The interest rate is 5%. According to the EOQ model, they determine that the optimal amount of cash they should obtain each time they need it is $27,020. Now suppose that two things change. First, interest rates decrease. Second, Champion's bank increases the cost of turning securities into cash. However, they continue, as before, to consume cash at a rate of $1,000 per day. Given this new information, what would you expect to happen to the firm's EOQ? 

Answer rating: 100% (QA)

In the EOQ Economic Order Quantity model the optimal amount of cash to obtain each time is determine... View the full answer