The Timberline fiRm Expects a Total Need of €12,500 Over

question 56

Multiple Choice

The Timberline firm expects a total 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.
Using the Baumol model, what is the optimum cash holding?

• A)€362.28
• B)€1,045.83
• C)€1,251.86
• D)€3,622.84
• E)None of the above.

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