Question: Required: Complete solution and explanation. Answer questions number 1 and 2. Optimum Cash Balance: ABC Corporation would like to know what is its optimal cash

Required: Complete solution and explanation.

Answer questions number 1 and 2.

Optimum Cash Balance: ABC Corporation would like to know what is its optimal cash balance for a disbursement account. The daily average disbursement is P40,000. Cost to transfer money into the account average P500 each time. If the money is not in this account, it could have been kept in a mutual fund account that would let ABC earn 3% per year. Required: 1. Optimum cash balance 2. Total cost of holding and maintaining the optimal cash balance

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