A firm has steady inflows and periodic outflows and wants to usethe Beranek model to manage its cash. Cash outflows occur onceper month; the amount of the next outflow is $2.16 million. It costs$200 to make an investment or a disinvestment. The yearly interestrate is 8 percent. Calculate:a. The optimal number of transactions.b. The amount of the periodic investments.c. The amount of the final withdrawal.d. The net profit from this strategy.

Beranek model : It is based upon the assumption that cash inflows are greater than cash outflows ,…

Answered: A firm has steady inflows and periodic…

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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