Rose Resources Faces a Smooth Annual Demand for Cash of $10

question 65

Multiple Choice

Rose Resources faces a smooth annual demand for cash of $10 million, incurs transaction costs of $325 every time they sell marketable securities, and can earn 3.9 percent on their marketable securities. What will be their optimal cash replenishment level?

• A) $28,867.51
• B) $288,675.13
• C) $40,824.83
• D) $408,248.29

---

Definitions:

Probability

A measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Net Earnings Per Share

A financial ratio calculated by dividing the net income of a company by the average number of its outstanding shares, indicating the company's profitability per share.

Stock Price

The cost of purchasing a single share of a company's stock, reflecting the value investors place on the company.

Expected Future

Anticipated conditions or outcomes in the economy, markets, or individual financial situations, often guiding decision-making.