Answered: PLC esti

Business

Accounting

PLC esti

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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Question

PLC estimate a cash of $2 500 000 over the next five months. This
amount is available to the firm in the form of marketable securities. It can earn 10%
annual yield on its marketable securities. Conversion of marketable securities into
cash entails a fixed cost of $750 per transaction.
Determine:
i. Optimum cash balance
ii. Average cash holding
iii. Number of transactions
iv. Average number of days per transaction (assume 30 days per month)
v. Total cost of holding cash balance
vi. Per day usage of cash

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