The Norris Company Is Trying to Determine Its Optimal Average

question 24

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.
-What will be the total cost to Norris 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

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Definitions:

Strategic Alignment

The practice of ensuring that an organization's structure, capabilities, and resources are in line with its business strategy and objectives.

Human Resources Planning

The process of forecasting an organization's future human resources needs and developing strategies to fulfill those needs.

Strategic Planning

The process of defining an organization's direction and making decisions on allocating its resources to pursue this strategy.

HRP Model

Human Resource Planning Model; a strategic process used by organizations to align their human resource needs with their business goals.