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

question 25

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 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:

Import Tariffs

Taxes imposed by a government on goods and services imported from other countries to protect domestic industries from foreign competition or to generate revenue.

Comparative Advantage

The capacity of a person, business, or nation to manufacture a product or deliver a service with a smaller opportunity cost than that of their rivals.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, technology).

Trade Protection

Measures implemented by governments to regulate international trade and protect domestic industries from foreign competition.