Optimal cash balance. The Madatung Corporation plans to have P 1 million insteady cash outlays for next year. The firm believes that it will face anopportunity interest rate of 15% and will incur a cost of P 200 each time itborrows (or withdraws).Required: Using the Baumol Model:1. Determine the transactions demand for cash (the optimal borrowing orwithdrawal lot size) for Madatung Company.2. What will be the cash cycle for the firm (in days)?3. What would be the average cash balance for the firm?4. Compute the total relevant cost of cash balance.Jor

GIVEN The Madatung Corporation plans to have P1 million in steady cash outlays for next year. The…

Optimal cash balance. The Madatung Corporation plans to have P1 million I steady cash outlays for next year. The firm believes that it will face an opportunity interest rate of 15% and will incur a cost of P 200 each time it borrows (or withdraws).

Optimal cash balance. The Madatung Corporation plans to have P1 million I steady cash outlays for next year. The firm believes that it will face an opportunity interest rate of 15% and will incur a cost of P 200 each time it borrows (or withdraws).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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