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Jan's Dry Cleaning Holds $10,000 on a Typical Day, Although

Question 2

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Jan's Dry Cleaning holds $10,000 on a typical day, although only $2,000 is essential for carrying out business. Making a midday deposit is estimated to reduce cash holdings to $8,000 and cost an extra $80 per year in lost production. If, in addition, an armored car service is engaged to pick up cash more frequently for a fee of $120 per year, cash holdings will be further reduced to $6,000 per day. Employing a computerized cash management service for an annual fee of $180 would reduce cash holdings further to $4,000. If any reduction in cash holdings will be used to purchase government bonds earning 5 percent, then how much money should Jan's hold?


A) $10,000
B) $8,000
C) $6,000
D) $4,000

Correct Answer:

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