Pinocchio Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. Required: Please solve 4-7 4. How much is the total holding cost? 5. How much is the total transaction cost? 6. How much is the total cost of cash?
Pinocchio Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. Required: Please solve 4-7 4. How much is the total holding cost? 5. How much is the total transaction cost? 6. How much is the total cost of cash?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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CASE 3
Pinocchio Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities.
Required: Please solve 4-7
4. How much is the total holding cost?
5. How much is the total transaction cost?
6. How much is the total cost of cash?
7. What will be your advice to the management?
Transcribed Image Text:CASE 3
Pinocchio Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24%
per annum. The company spends, on the average, P40 for every cash conversion to marketable securities.
Required:
1. Compute for the optimal cash conversion size.
2. Determine the average cash balance.
3. Determine the number of transactions.
4. How much is the total holding cost?
5. How much is the total transaction cost?
6. How much is the total cost of cash?
7. What will be your advice to the management?
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