Objective type questions on cash balances

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Reference no: EM1316321

Questions are based on the following information-

The Timberline firm expects a total need of $12,500 over the next 3 months. They have a beginning cash balance of $1,500, and cash is replenished when it hits zero. The fixed cost of selling securities to replenish cash balances is $3.50. The interest rate on marketable securities is 8% per annum. There is a constant rate of cash disbursement and no cash receipts during the month.

1. Based on the firm's current practice, what is the average daily cash balance (a month has 30 days)?

a) $50.00

b) $69.44

c) $94.44

d) $138.89

e) None of the above.

2. What is the total fixed order cost for the next three months based on the firm's current practice?

a) $29.17

b) $37.80

c) $55.60

d) $75.60

e) None of the above

Reference no: EM1316321

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