Assuming That the Inter-Affiliate Cash Flows Are Uncorrelated with One

question 21

Multiple Choice

Assuming that the inter-affiliate cash flows are uncorrelated with one another,calculate the minimum cash balance to have if the firm follows a conservative policy of having three standard deviations of cash for precautionary purposes. $$\begin{array} { l c c } & \text { Expected } & \text { Stardard } \\ \text { Affiliate } & \text { Trarnactions } & \text { Deviation } \\\text { U.S. }& \$ 100,000& \$ 40,000 \\\text { Carada } & \$ 150,000& \$ 60,000 \\\text { Mexico } & \$ 175,000 & \$ 30,000 \\\text { Chile }& \$ 200,000 & \$ 70,000\end{array}$$

• A)$34,960.33
• B)$314,642.65
• C)$104,880.88
• D)none of the options

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Definitions:

Environmental Uncertainty

Refers to unpredictable changes and complexities in an organization's external environment that can affect its operations and decision-making processes.

External Environment

All external factors and forces that can affect an organization's performance, including economic, social, political, and technological aspects.

Competitive Advantage

The attributes or conditions that allow an organization to outperform its competitors.

Cost Efficiency

The effectiveness of an organization's ability to produce output at the lowest possible cost while maintaining quality.