Question

A company has annual expenditures of $100,000. It costs $100 to convert marketable securities into cash. The opportunity cost is 10%. What is the optimal cash balance?

Answer #1

Annual Expenditure(A) = $100,000

Cost of conversion (C) = $100

Opportunity cost of capital (i) = 10%

Optimal cash balance can be calculated by the following formula:

**Optimal** transaction will be of $14,142.14

Average cash balance will be of half of 14,142.14 ie.
**$7,071.07**

A firm earns 5% on its marketable securities. It costs $500 in
commissions to convert the securities into cash. If the firm has
annual cash disbursements of $20,000,000. What is the optimal
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Eral Company has $17,000 in cash, $3,000 in marketable
securities, $36,000 in current receivables, $24,000 in inventories,
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ratio is closest to:
a
0.44 to 1.
b
0.80 to 1
c
1.24 to 1
d
1.78 to 1

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A Clarke Corporation subsidiary buys marketable equity
securities and inventory on April 1, 2017, for 100,000 won each. It
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$
0.45
=
1
won
April 1, 2017
0.46
=
1
June 1, 2017
0.47
=
1
December 31, 2017
0.49
=
1
A. Assume...

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36. Cash Management by investing in marketable
securities such as Treasury Bills,
Commercial Paper, of Negotiable Certificates of Deposit
are all forms of short-term lending.
T F
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T F
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T F

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