Solution-Minimum cost cash balance

Minimum cost cash balance

Reference no: EM131041332

Halliday Inc. receives a $2 million payment once a year. Of thisamount, $600,000 is needed for cash payments made during the nextyear. Each time Halliday deposits money in its account, a charge of$2.00 is assessed to cover clerical costs. If Halliday can holdmarketable securities that yield 5 percent, and then convert thesesecurities to cash at a cost of only the $2 deposit charge, what isthe total cost for one year of holding the minimum cost cash balance according to the Baumol model?

Reference no: EM131041332

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Minimum cost cash balance

Reference no: EM131041332

Reference no: EM131041332

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