Rearden Metal Has No Debt,and Maintains a Policy of Holding

question 61

Multiple Choice

Rearden Metal has no debt,and maintains a policy of holding $50 million in excess cash reserves,invested in risk free treasury securities currently yielding 4%.If Rearden is in the 40% marginal tax bracket,the cost of permanently maintaining this $50 million reserve is closest to:

• A)$0.8 million
• B)$1.2 million
• C)$20.0 million
• D)$30.0 million

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Definitions:

Push And Pull Systems

Supply chain strategies where "push" involves production based on forecasted demand and "pull" relies on actual demand signals for production.

Inventory Management System

A technology-based approach that tracks inventory levels, orders, sales, and deliveries to ensure that the right product is available at the right time.

Seasonality

The occurrence of fluctuations in demand, production, or other variables based on seasonal trends or patterns, often predictable within a calendar year.