The finance director of Chessington Inc. is reviewing their target c in light of their varying cash inflows. You decide that the Miller-Orr provide some useful guidelines. Given a lower cash balance leve standard deviation of monthly net cash flows of $700 and a mor rate of 0.5%. Transaction costs of switching from market securiti are $15 per transaction on average. I (a). Calculate the target cash balance. (b). Calculate the upper cash limit. (c). Calculate the average cash balance.

The finance director of Chessington Inc. is reviewing their target c in light of their varying cash inflows. You decide that the Miller-Orr provide some useful guidelines. Given a lower cash balance leve standard deviation of monthly net cash flows of $700 and a mor rate of 0.5%. Transaction costs of switching from market securiti are $15 per transaction on average. I (a). Calculate the target cash balance. (b). Calculate the upper cash limit. (c). Calculate the average cash balance.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Garage, Inc., has identified the following two mutually exclusive projects. a. What is the IRR for each project? b. If the required return is 11 percent, what is the NPV for each project? c. What is the crossover rate between these two projects? Year 0 Year 1 Year 2 Year 3 Year 4 Required return SSSSS A (43,500) 21,400 18,500 13,800 7,600 $ ESSASALA $ $ $ $ B (43,500) 6,400 14,700 22,800 25,200 11% Complete the following analysis. Do not hard code values in your calculations. You must use the built-in Excel functions to answer this question.
Bulldogs inc. will least likely experience which of the following if the firm shifts its credit terms from n/25 to 3/10, n/25 the computed days sales outstanding will decrease the percentage of credit sales from the total sales revenue will increase decrease in short-term borrowings cash conversion cycle will tend to increase The company’s usage of the Baumol model in cash management involves trade-off. A decrease in the optimal transaction size would more likely result from Decrease of debt to asset ratio Increase of return on marketable securities None of the choices is correct Increase in the annual demand for cash
TRUE OR FALSE: Write TRUE if the statement is correct; incorrect, write FALSE. 1. Managers and investors can use the time value of money analysis to compare current cash flows against future cash flows. 2. Because an ordinary annuity is paid at the beginning of each period rather than at the end, the payment collects interest during the period for which it is made. 3. You borrow Php 12,000 from your aunt and promise to repay her at the rate of P1,000 each month for the next year. This is an example of an annuity payout. 4. Compounding procedures are used to determine the present value, whereas discounting approaches are used to determine the future value. 5. Debtors establish payment amounts and the allocation of each payment to interest and principal using a loan amortization plan. 6. A 6 percent interest rate for five years will produce a higher present value interest factor than a 5 percent interest rate for six years. 7. 11.4359 is the factor rate if an investor is…
Webster provides the following information regarding its actual and future sales: February March April January Actual May Actual Forecast Forecast Forecast Cash Sales $ 50,000 $ 80,000 $ 90,000 $ 100,000 $ 120,000 Credit Sales 80,000 $ 12,000 $ 90,000 $ 40,000 $ 60,000 Management expects that 40% of credit sales are collected in the month of the sale. 40% are collected in the month after the month of sale. 20% are collected in the month following. na memo to your team (who are preparing the budgets), management also provides the following information: - The company has an obligation to repay $120,000 in debt in April. There is no debt to be repayed in the other months - Cost of sales is 50% of sales revenue. - The company has regular deliveries of inventory to ensure that it can continue to meet its customer obligations. Inventory deliveries are paid in the following month and expected to be equal to 60% of sales in the delivery month. - Salaries and wage expenses add up to $10,000 per…
Which one of the following sentences is true about cash management? O a. Treasurers want safety stock of cash. O b. Carrying costs for cash reserves are always higher than their cost of shortage. O c. M/2 is the average cash level in the Miller-Orr model. O d. In cash budgeting, we use indirect cash flows for 1-2 month.
Answer true of false to each of the following. briefly explain your reasoning for each answer a. All else equal, increasing the projected amount of accounts receivable in a financial forecast will increase external funding required. b. Estimates of external funding required based on cash flow forecasts are usually higher than estimates based on pro forma financial statements. c. An annual financial forecast for 2018 showing no external funding required assures a company that no cash shortfalls are likely to occur during 2018.
Find the present values of the following cash flow streams. The appropriate interest rate is 9%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent. Year Cash Stream A Cash Stream B 1 $100 $200 2 400 400 3 400 400 4 400 400 5 200 100 Stream A: $ Stream B: $ What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar. Stream A $ Stream B $
ABC Corporation has a lower and an upper limit for its savings account at 40,000 and 70,000 respectively. Its optimal return point is 50,000. If as of the end of the day, ABC has a cash balance of 13,000. How much should be it request for additional funds or onvest in marketable securities? Because its cash balance is less than lower cash limit, ABC should request for additional funds in the amount of:
Uneven Cash Flow Stream Find the present values of the following cash flow streams. The appropriate interest rate is 12%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent. Year Cash Stream A Cash Stream B 1 $100 $250 2 400 400 3 400 400 4 400 400 5 250 100 Stream A: $ Stream B: $ What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar. Stream…
Find the present values of the following cash flow streams. The appropriate interest rate is 6%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent. Year Cash Stream A Cash Stream B 1 $100 $250 2 400 400 3 400 400 4 400 400 5 250 100 Stream A: $ Stream B: $ What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar. Stream A $ Stream B $
Explain how each of the following factors would probably affect a firm’starget cash balance if all other factors were held constant.a. The firm institutes a new billing procedure that better synchronizes itscash inflows and outflows.b. The firm develops a new sales forecasting technique that improves itsforecasts.

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