Crowell Ltd is considering using the Miller Orr model to manage its cash flows The minimum cash balance would be KES 4,000,000 Other information is as follows Interest rate per annum 14 4 Transaction cost per sale KES 25,000 Standard deviation of daily cash flows KES 50,000 A year has 360 days Required Calculate the Miller Orr model upper limit and return point, and explain how these would be used to manage the cash balances of Crowell Ltd

The Answer is in the image, click to view ...

Question: Crowell Ltd. is considering using the Miller-Orr model to manage its cash flows. The minimum cash balance would be KES 4,000,000. Other information is as

Crowell Ltd. is considering using the Miller-Orr model to manage its cash flows. The minimum cash balance would be KES 4,000,000. Other information is as follows:

Interest rate per annum = 14.4%
Transaction cost per sale = KES 25,000
Standard deviation of daily cash flows = KES 50,000
A year has 360 days.

Required:

Calculate the Miller-Orr model upper limit and return point, and explain how these would be used to manage the cash balances of Crowell Ltd.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

On July 1, 2013, Amplex Company purchased a coal mine for $2 million. The estimated capacity of the mine was 800,000 tons. During 2013, Amplex mines 10,000 tons of coal per month and sells 9,000 tons...

QUESTION 2 (20 Marks) 2.1. Using the information provided below, answer the question that follows. INFORMATION Lambda Distributors (LD) is a regular supplier of branded beauty products to Edgemead...

2.1. Using the information provided below, answer the question that follows. (3 marks) INFORMATION Lambda Distributors (LD) is a regular supplier of branded beauty products to Edgemead Stores (ES)...

2.2. Use the information provided below to answer the following questions. INFORMATION During the financial year ended 31 December 2022, the total annual demand for cash at Edgemead Limited...

For the next financial year, Milestones Enterprises (Milestones) is considering using the Miller-Orr model to manage its cash flows. The minimum cash balance would be R200 000. A management...

INFORMATION Lambda Distributors (LD) is a regular supplier of branded beauty products to Edgemead Stores (ES) subject to normal credit terms of 30 days. Today, LD supplied R200 000 worth of...

Question 1 In terms of International Financial Reporting Standards (IFRS) 9: Financial Instruments, discuss how accounts receivable should be measured in GOLs financial statements. In addition,...

1. Martin Company uses Miller-Orr model to manage its cash, using a money-market fund and a checking account. Martin keeps a minimum balance of $5000 in the checking account. The checking account...

Question 1 40 Marks IGNORE ANY NORMAL INCOME TAX IMPLICATIONS Satoshi Ltd (Satoshi) is a Namibian company and has a 31 December year end. Satoshi sells rock drilling machinesthat are used in quarries...

Nekoachemo Ltd is a well-established company which was established 35 years ago. The financial year-end is 30 April each year. The company purchases logs of wood and prepares them for sale to other...

Help me solve the following. Answer all questions. 1. Question one a) The following extracts are from the financial statements of BENTI Ltd, as at 31 March: 2013 $ 2012 "000" $"000" Non- current...

What is an opinion leader? Describe how marketers attempt to use opinion leaders to help sell their products.

In 2012, ABC news ran a story regarding BPI, a South Dakota meat processing company, describing the companys ground-beef product as pink slime. The company sued ABC News for defamation claiming that...

j Multiple Choice Question ep A company receives a special order of 10,000 units of product. The potential customer is willing to pay $0.75 per unit. Current sales are $90,000 and current costs are...

Draw the compact representation of the suffix trie for the string: "minimize minime".

Your course instructor claims that energy is not really conserved. He or she uses the example of a spring that is compressed and then tied with a nylon string. When the compressed spring is put into...

List the main types of information which should be provided in the notes which accompany and form an integral part of the financial statements.

For their final project, a group of AP Statistics students wanted to compare the texting habits of males and females. They asked a random sample of students from their school to record the number of...

If y = c 1 x 2 + c 2 x 2 ln x, x > 0, is the general solution of a homogeneous second-order Cauchy Euler equation, then the DE is _______. Answer problem without referring back to the text. Fill in...

TRUE or FALSE: A common justification and goal of conducting a "moderated discussion" is to reach consensus or agreement. Question 1 3 options: True False

2. Many of the Top Small Workplace managers report that they invest more in training, recognition awards, and incentive programs than competing firms. They say these investments result in reduced...

Understand how to use positive reinforcement to improve relationships and reward behavior.

1. Carefully review the employee development practices initiated by managers at Decagon Devices Inc. and Paducah Bank & Trust Company. Determine which of these practices would be most appealing to...