Rainmaker Drains Incurs a $35 Cost Each Time It Sells

question 227

Multiple Choice

Rainmaker Drains incurs a $35 cost each time it sells securities. The firm needs $128,000 a year for transaction purposes. As a routine, Rainmaker sells securities every time the balance in the account declines to $1,000. The applicable interest rate is 3.5%. What is the target cash balance according to the BAT theory?

• A) $5,600
• B) $9,817
• C) $11,314
• D) $13,500
• E) $16,000

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Definitions:

Pay Differentials

Variations in pay for employees, often based on factors such as geographic location, job duties, industry standards, or skill levels.

Pay Structure

The systematic organization of pay rates within a company, defining compensation levels for different jobs or grades.

Compensation

The total amount of the monetary and non-monetary pay provided to an employee in return for work performed as required.