Veggie Burgers, Inc. would like to maintain its cash account at a minimum level of $247,000 but expects the standard deviation in net daily cash flows to be $12,200, the effective annual rate on marketable securities to be 4.9 percent per year, and the trading cost per sale or purchase of marketable securities to be $28.50 per transaction. What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Optimal cash return point

Veggie Burgers, Inc. would like to maintain its cash account at a minimum level of $247,000 but expects the standard deviation in net daily cash flows to be $12,200, the effective annual rate on marketable securities to be 4.9 percent per year, and the trading cost per sale or purchase of marketable securities to be $28.50 per transaction. What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Optimal cash return point

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

See similar textbooks

Related questions

Q: Which version of a project's payback period should the CFO use when evaluating Project Beta, given…

A: Payback period is the period required to recover the initial investment in the project and does not…

Q: Octavio's Tacos sells 49,000 ready-made lunches each year. You calculate that the degree of…

A: Increase in sales unit = 55000 units - 49000 units = 6000 units Increase in sales units % = Increase…

Q: HotFoot Shoes would like to maintain its cash account at a minimum level of $39,000, but expects the…

A: Given:cash account at a minimum level of $39,000 = Lnet daily cash flows to be $5,400 = marketable…

Q: Wyatt Widgets has an expected cash flow of $4,500,000 and the standard deviation of the cash flow is…

A: Here's a breakdown of the key concepts involved:Liquidity Risk: This refers to the risk of a company…

Q: You are building a free cash flow to the firm model. You expect sales to grow from $1.6 billion for…

A: The objective of the question is to calculate the value of the equity on a per-share basis using the…

Q: year 6 and onward after that. Use the following information to calculate the value of the equity on…

A: The equity value is equivalent to the amount of money that would remain if the company's debts were…

Q: ortunity to invest the money at 24% per annum. The company spends, on the average, P40 for every…

A: These costs are expressed as: F x [T/C] + i.[C/2] Where: F =Fixed cost of a transactionT =Total Cash…

Q: ABC Corporation has 9million in inventory and 8m in accounts receivable. A 20% reduction in…

A: Cash conversion cycle refers to the number of days which has incurred in converting the investment…

Q: Company has experienced a stochastic demand for its product, which results in fluctuating cash…

A: We need to use Miller Orr model to solve the given problem

Q: Your company is expected to earn (as a cash flow) $3 million next year, $3.06 million the following…

A: The value of the company is calculated as the discounted value of cash flows.

Q: Karga Transportation operates in the landspeeder and interstellar transports markets. Karga will…

A: GIVEN, LANDSPEEDER INTERSTELLAR CASHFLOW $40 million per year $50 million per year n 10…

Q: What will be their optimal upper cash limit?

A: The optimal upper cash limit describes the maximum level of cash reserves that a company should…

Q: Ambrin Corp. expects to receive $6,000 per year for 14 years and $7,500 per year for the next 14…

A: Present Value of annuity refers to the current value of a series of equal cash flows or payments at…

Q: The conventional payback period ignores the time value of money, and this concerns Cute Camel’s CFO.…

A: Year 0 Year 1 Year 2 Year 3 Cah Flow -$5,000,000 $2,000,000 $4,250,000 $1,750,000 Cost of…

Q: "eggie Burgers, Inc. would like to maintain its cash account at a minimum level of $258,000 but…

A: Given:Minimum level of $258,000 = LStandard deviation of daily cash flows to be $13,300 = marketable…

Q: r expected return on this investment?

A: Expected return on investment refers to the rate of return that an investor is expecting on an…

Q: Veggie Burgers, Inc. would like to maintain its cash account at a minimum level of $257,000 but…

A: Given,Minimum level of cash (L) = $257,000Standard deviation of daily cash flows () =…

Q: The conventional payback period ignores the time value of money, and this concerns Cute Camel's CFO.…

A: Discounted cash flow (DCF) is a financial valuation method used to estimate the value of an…

Q: Ambrin Corp. expects to receive $6,000 per year for 14 years and $7,500 per year for the next 14…

A: NPV can be calculated by following function in excel=NPV(rate,value1,[value2],…) + Initial…

Q: "You have recently been hired to improve the performance of Multiplex Corporation which has been…

A: To calculate the cash conversion cycle for Multiplex Corporation, we need to find the number of days…

Q: series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and…

A: The present value of the money is the discounted cash flow with a certain discount rate. Generally,…

Q: Stellar Shoes would like to maintain their cash account at a minimum level of $25,000, but expects…

A: optimal level of cash refers to the minimum cash balance that is necessary to be maintained for…

Q: The finance director of Chessington Inc. is reviewing their target c in light of their varying cash…

A: Maintaining optimal level of cash is very important and too less cash or too more cash is not good…

Q: ces Veggie Burgers, Inc. would like to maintain its cash account at a minimum level of $263,000 but…

A: Step 1: Step 2: Step 3: Step 4:

Q: How did they get net cash inflow in this problem? I don't need anything else solved, just need to…

A: Data given: Sale of prototype chips in 2021 = 595 Sale of prototype chips in 2022 = 595+85= 680 Sale…

Q: 6. The payback period The payback method helps firms establish and identify a maximum acceptable…

A: Data given: Description Year 0 1 2 3 Expected cash flow ($)…

Q: Quantitative Problem: You own a security with the cash flows shown below. 0 $ 1 2 3 4 0 640 375 250…

A: Required return = 10% or 0.10 Present value is the discounted value of all the future cash inflows…

Q: You are building a free cash flow to the firm model. You expect sales to grow from $2 billion for…

A: The operating margin is the profit earned by the company after its accounts for all the operating…

Q: what will the investment generate? (Do not round your intermediate calculations. Round your answer…

Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Veggie Burgers, Inc. would like to maintain its cash account at a minimum level of $247,000 but expects the standard deviation in net
daily cash flows to be $12,200, the effective annual rate on marketable securities to be 4.9 percent per year, and the trading cost per
sale or purchase of marketable securities to be $28.50 per transaction.
What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2
decimal places.)
Optimal cash return point

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction of the question:

VIEW

Step 2: Computation of optimal return point:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Veggie Burgers, Inc. would like to maintain its cash account at a minimum level of $246,000 but expects the standard deviation net daily cash flows to be $12,100, 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 $28.00 per transaction. What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Optimal cash return point $ 287,757.72
HotFoot Shoes would like to maintain its cash account at a minimum level of $33,000, but expects the standard deviation in net daily cash flows to be $4,800, the effective annual rate on marketable securities to be 7.3 percent per year, and the trading cost per sale or purchase of marketable securities to be $280 per transaction. What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Optimal cash return point 60 $
(Related to Checkpoint 13.1) (Forecasting cash flows using the expected value) Koch Transportation is contemplating the acquisition of LH Transport, a competing trucking firm. Koch's CFO estimates that during the next year LH Transport's cash flows from the acquisition will vary depending on the state of the local economy: a. Calculate the expected cash flow for next year using the estimates provided above. b. Assume the probability of a recession increases to 38 percent, the normal scenario probability remains at 53 percent, and the expansion probability drops to only 9 percent. What is your estimate of the expected cash flow for next year under these circumstances? c. Your analysis of the acquisition suggests that for the investment to have at least a zero NPV, it must produce an annual expected cash flow of $83,610 per year over the next five years. Assuming that the cash flow you estimated in part a is the expected cash flow for Years one through five, what would you like to know…
You are building a free cash flow to the firm model. You expect sales to grow from $1.6 billion for the year that just ended to $1.84 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 5 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $528 million of net PPSE. b. The company currently has $176 million of net working capital. c. The company has operating margins of 10 percent and has an effective tax rate of 30 percent. d. The company has a weighted average cost of capital of 9 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 2 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. S
Please solve using excel and explain formulas.
Your consulting firm was recently hired to improve the performance of RP Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis. you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is the firm's present cash conversion cycle? Average inventory Annual sales Annual cost of goods seld Average accounts receivable Average accunts payable P5.000 P00.000 PH0,000 P0,000 F5000 140.6 days 120.6 days 133.6 days 148.0 days O 126.9 days
You have recently been hired to improve the performance of Multiplex Corporation, which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm’s cash conversion cycle. Using the following information and a 365-day year,(a) what is your estimate of the firm’s current cash conversion cycle? Current inventory = $241,000.00 • Annual sales = $1,200,000.00 • Accounts receivable = $300,000.00 • Accounts payable = $245,000.00 • Total annual purchases = $600,000.00 • Purchases credit terms: net 30 days. • Receivables credit terms: net 50 days.
XYZ Corporation has a lower and an upper limit for its savings account at P40,000 and P70,000 respectively. Its optimal return point is P50,000. If as of the end of the day, XYZ has a cash balance of P13,000. How much should it request for additional funds or (invest in marketable securities)? Because its cash balance is less than the lower cash limit, XYZ should request for additional funds in the amount of:
F2 Penco Supply spends £428,000 a week to pay bills and maintains a lower cash balance limit of £75,000. The standard deviation of its disbursements is £18,900. The applicable interest rate is 5 per cent and the fixed cost of transferring funds is £65. What is the firm's optimal initial cash balance based on the BAT model?
Problem 10-1 Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply or demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows: Year NOI 1 $ 1,285,000 2 1,285,000 3 1,285,000 4 1,295,000 5 1,345,000 6 1,395,000 7 1,434,000 8 1,474,170 A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,285,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflect a stable, balanced market should grow at 3 percent per year indefinitely. Zenith believes that investors should earn a 12 percent return (r) on an investment of this kind. ?
Quantitative Problem: You own a security with the cash flows shown below. 0 1 2 3 4 0 690 395 230 320 If you require an annual return of 12%, what is the present value of this cash flow stream? Do not round intermediate calculations. Round your answer to the nearest cent.
The question is in the below

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS