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Calculate the lower limit and upper limit and return point

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Reference no: EM132552116

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

a) the lower limit

b) the upper limit

c) Return point

Reference no: EM132552116

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