Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 23, Problem 2P
Optimal Cash Transfer
Barenbaum Industries projects that cash outlays of $4.5 million will occur uniformly throughout the year. Barenbaum plans to meet its cash requirements by periodically selling marketable securities from its portfolio. The firm’s marketable securities are invested to earn 12%, and the cost per transaction of converting securities to cash is $27.
- a. Use the Baumol model to determine the optimal transaction size for transfers from marketable securities to cash.
- b. What will be Barenbaum’s average cash balance?
- c. How many transfers per year will be required?
- d. What will be Barenbaum’s total annual cost of maintaining cash balances? What would the total cost be if the company maintained an average cash balance of $50,000 or of $0 (it deposits funds daily to meet cash requirements)?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A firm has steady inflows and periodic outflows and wants to use
the Beranek model to manage its cash. Cash outflows occur once
per month; the amount of the next outflow is $2.16 million. It costs
$200 to make an investment or a disinvestment. The yearly interest
rate is 8 percent. Calculate:
a. The optimal number of transactions.
b. The amount of the periodic investments.
c. The amount of the final withdrawal.
d. The net profit from this strategy.
An investment has the following cash flows:
August 21, 2008
February 12, 2009
October 17, 2010
April 15, 2011
May 28, 2012
July 19, 2013
November 22, 2014
August 21, 2015
C.
$ -700
$ +300
$ +400
$ +600
$ +300
$ +400
$ +200
$ -1800
a.
Calculate the Net Present Value of this investment. Assume the annual discount rate is 15%.
b. Create a data table and graph illustrating the impact of the discount rate on the Net Present
Value of this investment. Include a title and label the axes for the graph.
Use Solver to determine the Internal Rate of Return(s) associated with this investment.
Asap
Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 5.5%. The study period needs to be exactly 8 years and each year should have at least one unique cash-flow that is different from the cash-flows over the other years. Your answer should contain a table showing the cash-flows for each year and a graphical representation of the cash-flows (cash-flow diagram).
Chapter 23 Solutions
Intermediate Financial Management (MindTap Course List)
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
- Please provide answer in text (Without image)arrow_forwardUsing Microsoft Excel, create an investment cash-flow diagram that will have a present worth ofzero using MARR = 14.5%. The study period needs to be exactly 8 years and each year shouldhave at least one unique cash flow that is different from the cash flows over the other years. Youranswer should contain a table showing the cash flows for each year and a graphical representationof the cash flows (cash-flow diagram)arrow_forwardUsing Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 14.5%. The study period needs to be exactly 8 years and each year should have at least one unique cash flow that is different from the cash flows over the other years. Your answer should contain a table showing the cash flows for each year and a graphical representation of the cash flows (cash-flow diagram).arrow_forward
- General Accountingarrow_forwardPlease include cash-flow diagram(s).arrow_forwardProblem The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. Using the Baumol model, what level of cash infusion minimizes Sandbox’s costs associated with cash? Use a number, no decimal value no currency, no space, no commas. * 2. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the total costs per month associated its cash infusions? Use a number, no decimal value no currency, no space, no commas * please answer all questions. Thanks!arrow_forward
- The HUT is evaluating a 5 year investment projected to yield the following relevant cash flows over its 5 year life: Given that the firm employs a 12% discount rate, what is the value of each of the three criteria: NPV? Profitability Index? Payback Period? round each to the nearest hundredth, as in "123.45".arrow_forwardFind the IRR and NPV of an investment having initial cash outflow of €200,000. The cash inflows during the first, second, third and fourth years are expected to be €25,000, €75,000, €65,000 and €80,000 respectively. Discount rate at 25%arrow_forwardFor the net cash flow series, find the external rate of return (EROR) using the MIRR method with an investment rate of 25% per year and a borrowing rate of 11% per year. What is the external rate of return?arrow_forward
- The HUT is evaluating a 5 year investment projected to yield the following relevant cash flows over its 5 year life: Given that the firm employs a 12% discount rate, what is the value of each of the three criteria: NPV? Profitability Index? Payback Period? Varrow_forwardIf average daily remittances are $1 million, and extended disbursement float adds 12 days to the disbursement schedule, how much should the firm be willing to pay for a cash management system if the firm earns 15% on excess funds?arrow_forwardPresent value with multiple cash flows: Biogenesis Inc. management expects the following cash flow stream over the next five years. (see below) They discount all cash flows using a 23 percent discount rate. What is the present value of this cash flow stream? Please use Excel to solve Year 1: -$1,133,676 Year 2: -$978,472 Year 3: $275,455 Year 4: $878,326 Year 5: $1,835,444arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
What is Transfer Pricing for Small Businesses?; Author: Nomad Capitalist;https://www.youtube.com/watch?v=_Q6nN3s1Xjs;License: Standard Youtube License