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

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Definitions:

Capillaries

The smallest blood vessels in the body's circulatory system, where the exchange of water, oxygen, carbon dioxide, and many other nutrient and waste substances occurs.

Transfers

The process of moving or conveying something from one place, person, or thing to another.

Human Systemic Circuit

The part of the cardiovascular system which carries oxygenated blood away from the heart to the body, and returns deoxygenated blood back to the heart.

Lungs

Pair of respiratory organs situated in the chest of vertebrates, responsible for oxygen intake and carbon dioxide expulsion.