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C. Cash Management, Type 2. A company’s cash balance varies randomly from day to day. It costs the company $30.00 per transaction to move funds from the cash account (which is non-interest bearing) to an account that earns interest or to move funds from the interest bearing account to the cash account. Its average return on interest bearing securities is 1.65%. The company wants to maintain a minimum cash balance of $40000. The variance of the company’s daily cash balance is 241,025,000. 1. When the company’s cash balance reaches $40000, how much money should be added to the cash account by selling interest bearing investments? 2a. At what cash account balance (upper limit) will funds from the cash account be used to purchase interest bearing investments? b. What dollar amount of interest bearing investments will be purchased when the cash account balance reaches the amount indicated in part a. 3a. How would the results (answer to questions 1 and 2a and b) change if the variance of daily cash balance were to increase by 30%? b. How would the results (answer to questions 1 and 2a and b) change if the interest rate were to increase to 2.00%? c. How would the results (answer to questions 1 and 2a and b) change if the costs to convert to or from cash were to increase to $35?
Now or Later, Inc. recently paid $1.10 as an annual dividend. Future dividends are projected at $1.14, $1.18, $1.22, and $1.25 over the next four years, respectively. After that, the dividend is expected to increase by 2% annually. What is one share ..
What is the Internal Rate of Return of the project? What is the after-tax payback period of the project?
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 9 % 45 % B 13 % 55 % Correlation = –1 a..
what must be the risk-free rate?
what the difference in principle pay down is between the two methods at year ends 2018?
A project has the following estimated data: price = $64 per unit; variable costs = $42 per unit; fixed costs = $15,000; required return = 15 percent; initial investment = $28,000; life = four years. Ignoring the effect of taxes, what is the accountin..
You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $1.50 a share at the end of the year (D1 = $1.50) has a beta of 0.9. The risk-free rate is 4.6%, and the market risk premium is 5.0%. Keller currently se..
Compare the before-tax equivalent uniform annual cost EUAC of the defender(keeping Machine A) to the challenger (buying Machine B).
Explain the importance of distinguishing between variable and fixed costs. If business is expected to be steady from month to month.
Crimson inc. is planning to expand its operations in the fish-farming industry. The depreciation tax shield is as risky as the project’s assets.
If one family member has doctor and prescription medication expenses of $1,420, what amount would the insurance company pay?
Calculate the price of a zero coupon bond that matures in 14 years if the market interest rate is 5.45 percent.
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