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Question 1 A. Welders PLC, which currently has negligible cash holdings, expects to have to make a series of cash payments totalling $3 000 000 over the forthcoming year. These will become due at a steady rate and can be met by making periodic sales from existing holdings of short-term securities. According to the company's financial advisors, the most likely average percentage rate of return on these securities is 9% over the forthcoming year, although this estimate is highly uncertain. Whenever the company sells securities, it incurs a transaction fee (T) of $50. i. Calculate the optimal cash balance for the company ii. What is the optimal number of times Welders should sell securities? iii. Determine the cost of holding cash resulting from this policy. iv. How would you evaluate this approach to cash management? (2 marks) (1 mark) (3 marks) (3 marks) B. A company has set a safety cash balance of S6 000. The standard deviation of the daily cash balance during the last year was $600 and the transaction cost was $8. The company also has an opportunity to invest idle cash in marketable securities at an annual interest rate of 12% Assume a 360-day year. Determine: i. daily opportunity cost interest rate) and the variance of daily cash flow. (2 marks) ii. the targeted cash balance (the return point) for the firm. (3 marks) in the upper limit of cash balance (1 mark) iv. the number of short-term securities to be purchased or sold once the upper or lower limit is reached (2 marks) v. how you would evaluate this approach to cash management. (3 marks) (Total 20 marks)