Penco Supply Spends $319,600 a Week to Pay Bills and Maintains

question 2

Multiple Choice

Penco Supply spends $319,600 a week to pay bills and maintains a lower cash balance limit of $65,000. The standard deviation of its disbursements is $12,900. The applicable interest rate is 3.26 percent and the fixed cost of transferring funds is $43. What is the optimal initial cash balance based on the BAT model?

• A) $167,154
• B) $210,929
• C) $168,753
• D) $221,506
• E) $209,385

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