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

question 10

Multiple Choice

Exhibit Duckett Group
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 Duckett Group.According to the Baumol model, what is the optimal transaction size for transfers from marketable securities to cash?

• A) $7,071
• B) $38,357
• C) $70,711
• D) $102,956
• E) $87,000

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Definitions:

Accounting Data

Information related to financial transactions and status used for analysis, reporting, and decision making in business.

Economic Event

An action that has the potential to impact the financial position of a company, such as a sale, purchase, or investment.

Transaction

An economic event that involves the exchange of goods, services, or funds between two parties.

Accounting Process

A systematic approach to recording, summarizing, and reporting financial transactions for a business.