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Calculate the lower limit

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The Konso Company wishes to apply the Miller-Orr model to manage its cash investment. Konso's management has collected the following estimates:

Cost per transaction = $200

Variance of daily cash flows = $10,000

Opportunity cost of cash, per month = 1.5%

  • Konso management has figured, based on their experience dealing with the cash flows of the company, that there should be a cushion- a safety stock (minimum)-of cash of $20,000.

Required:

Question 1: Calculate the lower limit, the upper limit and Return point

Reference no: EM132512890

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