Question 1 B. A. Bramwell Ltd has experienced a stochastic demand for its product, which results in fluctuating cash balances randomly. The following information is supplied: 1. Fixed cost of a securities transaction $100 2. Standard deviation of daily net cash flows $1,000 3. Interest rate on marketable securities 6% Required: Determine: i. the daily opportunity cost (interest rate) and the variance of daily cash flow. ii. the optimal cash and average cash balance iii. the upper and lower limit of cash balance (2 marks) (3 marks) (2 marks) iv. State the amount of short-term securities to be purchase or sold once the upper limit or lower limit is reached. (2 marks) Hardmills Manufacturing Company presents the following information from the accounting records concerning sales and discount policy: Current annual credit sales: Collection period: Terms: Rate of return: $24,000,000 3 months net/30 18% The company is considering offering a 4/10, net/30 discount. It anticipates that 30 percent of its customers will take advantage of the discount. The collection period is expected to decrease to two (2) months. Required: Should the discount policy be implemented by the company? Give reasons. (6 marks)