2B5D A FIRM USES THE FOLLOWING MODEL TO DETERMINE THE OPTIMAL AVERAGE...
139.
CSO: 2B5b
LOS: 2B5d
A firm uses the following model to determine the optimal average cash balance (Q).
2 x annual cash disbursement
x cost per sale of T-Bill
Q =
interest rate
An increase in which one of the following would result in a decrease in the optimal cash
balance?
a.
Uncertainty of cash outflows.
b.
Cost of a security trade.
c.
Return on marketable securities.
d.
Cash requirements for the year.