Veggie Burgers, Inc., would like to maintain its cash account at a minimum level of $246,400; but expect the standard deviation in net daily cash flows to be $13,600; the effective annual rate on marketable securities to be 4.8 percent per year, and the trading cost per sale or purchase of marketable securities to be $28 per transaction. What will be its optimal cash return point?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter14: Capital Structure Management In Practice
Section: Chapter Questions
Problem 27P
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Veggie Burgers, Inc., would like to
maintain its cash account at a
minimum level of $246,400; but
expect the standard deviation in net
daily cash flows to be $13,600; the
effective annual rate on marketable
securities to be 4.8 percent per year,
and the trading cost per sale or
purchase of marketable securities to be
$28 per transaction.
What will be its optimal cash return
point?
Transcribed Image Text:Veggie Burgers, Inc., would like to maintain its cash account at a minimum level of $246,400; but expect the standard deviation in net daily cash flows to be $13,600; the effective annual rate on marketable securities to be 4.8 percent per year, and the trading cost per sale or purchase of marketable securities to be $28 per transaction. What will be its optimal cash return point?
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