Determining the cash balance of zale

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You have noticed that Zale has a cash balance of $120 million invested in commercial paper (CP) and T-Bills (T-B) earning 0.6% a year. You estimate that there is a 60% probability that the management of Zale will reinvest this cash in assets that are similar to their exiting operating assets' risk return profile. There is a 40% likelihood that the cash will be continued to be invested in CPs and T-Bs.

What value would you attach to the cash balance of Zale

Reference no: EM133197440

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