The management of the Book Warehouse Company wishes to apply the Miller-Orr model to manage its cash investment. They have determined that the cost of either investing in or selling marketable securities is $100. By looking at Book Warehouse’s past cash needs, they have determined that the variance of daily cash flows is $20,000. Book Warehouse’s opportunity cost of cash, per day, is estimated to be 0.03%. Based on experience, management has determined that the cash balance should never fall below $10,000. 4. How much is the variance of daily cash flows?(Use a number, no decimal value, no commas, no currency, no space) * 5. How much is the lower limit based on the Miller-Orr model of cash management
PROBLEM
The management of the Book Warehouse Company wishes to apply the Miller-Orr model to manage its cash investment. They have determined that the cost of either investing in or selling marketable securities is $100. By looking at Book Warehouse’s past cash needs, they have determined that the variance of daily cash flows is $20,000. Book Warehouse’s opportunity cost of cash, per day, is estimated to be 0.03%. Based on experience, management has determined that the cash balance should never fall below $10,000.
4. How much is the variance of daily cash flows?(Use a number, no decimal value, no commas, no currency, no space) *
5. How much is the lower limit based on the Miller-Orr model of cash management? (Use a number, no decimal value, no commas, no currency, no space) *
6. How much is the opportunity cost of cash, per day? (Use a number, must be in decimal form. eg. 6.3%/100, encode 0.063 , no commas, no currency, no space) *
PLEASE ANSWER ALL QUESTIONS. THANKS!
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