Exhibit 23.1 The Duckett Group Is Trying to Determine Its Optimal Average

question 6

Multiple Choice

Exhibit 23.1
The Duckett Group is trying to determine its optimal average cash balance. The firm has determined that it will need $5,000,000 net new cash during the coming year. The fixed transaction cost of converting securities to cash is $50, and the firm earns 10 percent on its marketable securities investments.
-Refer to Exhibit 23.1.According to the Baumol model,what should be Duckett's average cash balance?

• A)$35,356
• B)$3,536
• C)$22,157
• D)$70,711
• E)$42,918

---

Definitions:

Biological Clock

An internal mechanism that regulates physiological and behavioral functions in a rhythmic cycle, such as the sleep-wake cycle.

Circadian Rhythms

Biological processes that display an endogenous, entrainable oscillation of about 24 hours, influencing various physiological functions.

Hormone

A chemical substance produced in the body that controls and regulates the activity of certain cells or organs.

Psychedelics

Substances that produce changes in perception, mood, and cognitive processes through their action on the brain's chemistry.