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How much is the average cash balance

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Question - Dilligence Co. estimated that it needs P8,000,000 cash per year. The interest rate it can expect to earn on its investment is 5 % per annum (pa). The transaction costs associated with each separate investment of funds or conversion into cash is constant at P800. How much is the average cash balance, annual opportunity cost, number of transaction cost per annum, annual transaction cost, total opportunity cost, and total annual cost of funds if Diligence Co. maintains the following cash balance in its checking account:

a. P6,000,000

b. 4,000,000

c. 2,000,000

d. 1,000,000

Reference no: EM133156985

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