Exhibit 23.1
The Duckett Group is trying to determine its optimal average cash balance. The firm has determined that it will need $5,000,000 net new cash during the coming year. The fixed transaction cost of converting securities to cash is $50, and the firm earns 10 percent on its marketable securities investments.
-Refer to Exhibit 23.1.What will be the total cost to Duckett of maintaining the optimal average cash balance,as determined by the Baumol model?
A)$35,356
B)$7,071
C)$18,493
D)$70,711
E)$53,190

Question

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The Answer of Exhibit 23.1
The Duckett Group is trying to determine its optimal average cash balance. The firm has determined that it will need $5,000,000 net new cash during the coming year. The fixed transaction cost of converting securities to cash is $50, and the firm earns 10 percent on its marketable securities investments.
-Refer to Exhibit 23.1.What will be the total cost to Duckett of maintaining the optimal average cash balance,as determined by the Baumol model?
A)$35,356
B)$7,071
C)$18,493
D)$70,711
E)$53,190

Exhibit 23.1 The Duckett Group Is Trying to Determine Its Optimal Average