The Timberline firm expects a total cash 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 opportunity cost for a month based on the firm's current practice?
A) $5.00
B) $18.98
C) $27.92
D) $60.00
E) None of the above.
Correct Answer:
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