Your corporate financial manager has decided to liquidate securities to provide for cash needs in units of $50,000.Is that amount of cash consistent with annual cash needs of $2,500,000, costs per sale of $30, and annual T-bill rate of 6 percent?

Question

Quizplus · Accepted Answer

The optimal cash balance can be calculated using the Baumol model, which considers transaction costs and opportunity costs. Given the annual cash needs of $2,500,000, a cost per sale of $30, and an annual T-bill rate of 6%, the $50,000 liquidation amount is consistent with these parameters.

Your Corporate Financial Manager Has Decided to Liquidate Securities to Provide