The Norris Company Is Trying to Determine Its Optimal Average

question 12

Multiple Choice

The Norris Company 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.
-According to the Baumol model, what should be Norris' average cash balance?

• A) $35,356
• B) $ 3,536
• C) $22,157
• D) $70,711
• E) $42,918

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Definitions:

Secondary Growth

This is the process in plants that results in the thickening of stems and roots, mainly due to the activity of the vascular cambium and cork cambium.

Xylem

The vascular tissue in plants responsible for the conduction of water and nutrients from the roots to other parts of the plant.

Palisade Mesophyll

A layer of closely packed photosynthetic cells under the epidermis in leaves, responsible for the absorption of light necessary for photosynthesis.

Spongy Mesophyll

A layer of loosely arranged cells in a plant leaf, facilitating gas exchange and containing chloroplasts for photosynthesis.