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.
What is the total saving to the ﬁrm if it switches from its current practice to the optimum practice (as
Given by the Baumol model)?

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The Answer of 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.
What is the total saving to the ﬁrm if it switches from its current practice to the optimum practice (as
Given by the Baumol model)?

The Timberline ﬁRm Expects a Total Need of €12,500 Over