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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The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements. Assume that Smith Company determined that it has a 40% probability of receiving $10,000 one year from now and a 60% probability of receiving $10,000 two years from now. (Click here to access the PV and FV tables to use with this problem.) Required: Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually. Round your answer to two decimal places. $
Uneven Cash Flow Stream Find the present values of the following cash flow streams. The appropriate interest rate is 11%. (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 $300 2 400 400 3 400 400 4 400 400 5 300 100 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…
The company A manages cash by using Baumol model for defining the amount of cash. According to the Baumol model the average model the average balance (C */2) is equal to 500$. That moment the negotiable securities yield was 4%. A steep rise caused an increase in interest rates to 9%. Which is the new average cash balance?
Following is the information given: 1. Lower control limit is Rs. 2000, 2. Interest rate per day is 0.020%, 3. Variance of daily cash flows of Rs. 500000, 4. Switching costs per transaction is Rs. 30. Calculate spread, Upper limit and Return point according to Miller Orr Model of Cash Management. Differentiate between gross and net working capital. Give an example for each.
Suppose that the First United Bank of America has two loans. Each is due to be repaid one period hence and has independent and identically distributed cash flows. Each loan will repay $300 with a probability of 0.8 and $150 with a probability of 0.2. However, while the bank knows this, the investors cannot distinguish this loan from that of the Third TransAmerica Bank, which has the same number of loans, but will pay $300 with a probability of 0.5 and $150 with a probability of 0.5. There is a prior belief of 0.5 that the First United Bank of America has the higher-valued portfolio. Suppose that the First United wished to securitize these loans, and if it does so without a credit enhancement, the cost of communicating the true value is 7.5% of the true value. Assume that the discount rate is zero and that everybody is risk-neutral. Consider the following securitization scenario. The First United can create two classes of bondholders in a senior- subordinated structure or junior-senior…
1.
Hank PlC aims to hold a target cash balance of £7,588 by buying and selling short term securities. Their finance director specifies £3,352 as the lower control limit of cash balance and belives Miller-Orr Model is the appropriate cash management model. Calculate the expected average cash balance of Hank PLC(£)
A product manager prepared the following forecasts for a product line: 1 3 4 5 6 and later 2 + $2m $2m $3m $4m $4m g=2.5% If the appropriate discount rate is 8.5%, what is the present value of these future cash flows?
Given: Cash transactions as shown in cash flow diagram. %24 g = 4%/yr (positive transactions decreases from year to year) i = 10% per year 1 3 4. 5 7 12 13 14 15 Yrs g = 5%/yr (negative transactions become more negative) Required: (i) The net equivalent value at year 0 (Po)
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