WOPPERS PLC, which currently has negligible cash holdings, expects to have to make a series of cash payments totalling $3 000 000 over the forthcoming year. These will become due at a steady rate and can be met by making periodic sales from existing holdings of short-term securities. According to the company’s financial advisors, the most likely average percentage rate of return on these securities is 9% over the forthcoming year, although this estimate is highly uncertain. Whenever the company sells securities, it incurs a transaction fee (T) of $50. Calculate the optimal cash balance for the company What is the optimal number of times Welders should sell securities? . Determine the cost of holding cash resulting from this policy.
WOPPERS PLC, which currently has negligible cash holdings, expects to have to make a series of cash payments totalling $3 000 000 over the forthcoming year. These will become due at a steady rate and can be met by making periodic sales from existing holdings of short-term securities. According to the company’s financial advisors, the most likely average percentage rate of return on these securities is 9% over the forthcoming year, although this estimate is highly uncertain. Whenever the company sells securities, it incurs a transaction fee (T) of $50. Calculate the optimal cash balance for the company What is the optimal number of times Welders should sell securities? . Determine the cost of holding cash resulting from this policy.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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WOPPERS PLC, which currently has negligible cash holdings, expects to have to make a series of cash payments totalling $3 000 000 over the forthcoming year. These will become due at a steady rate and can be met by making periodic sales from existing holdings of short-term securities. According to the company’s financial advisors, the most likely average percentage
- Calculate the optimal cash balance for the company
- What is the optimal number of times Welders should sell securities?
- . Determine the cost of holding cash resulting from this policy.
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