The Smythe firm expects a total cash need of $9,000 over the next 4 months. They

Question

The Smythe firm expects a total cash need of $9,000 over the next 4 months. They have a beginning cash balance of $1,000, and cash is replenished when it hits zero. The fixed cost of selling securities to replenish cash balances is $4.00. 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 fixed order cost for the next three months based on the firm's current practice? A. $36.00 B. $37.00 C. $40.00 D. $42.00 E. None of these. Incorrect

Explanation / Answer

Number of times securities are sold = $9000 /$1000 = 9

Cost of selling securities = $ 4.00

Total Fixed order cost = 9 * $4 = $ 36

ANSWER = A) $36

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.