Parkway Express Needs $318,000 a Week to Pay Bills

question 71

Multiple Choice

Parkway Express needs $318,000 a week to pay bills.The standard deviation of the weekly disbursements is $31,000.The firm has established a lower cash balance limit of $60,000.The applicable interest rate is 4.5 percent and the fixed cost of transferring funds is $65.Based on the BAT model,what is the opportunity cost of holding cash?

• A)$3,873
• B)$4,918
• C)$5,207
• D)$109,283
• E)$110,440

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Definitions:

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