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

question 43

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)€3,613.82
• E)None of the above.

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