Jordan Moore, the budget manager for the City of Henderson, has requested that you requested that you assist him with the management of the cities’ funds. Specifically, he wants you to calculate the two scenario listed below based on the following information. This problem can be completed in a spreadsheet or in a word processing package
A. The city has total cash payments of %15 million (T) for a 6-month period. Assume that the payment over this period is steady. The cost per transaction is $65 (b), the interest rate is 3% for the period (i), and the cost per dollar of funds transferred is.05% (v).
1. Calculate the optimal initial cash balance and transfer size
2. Average cash balance
3. The number of transfers
4. The total cost of cash management
B. The city has total cash payments of $13 million (T) for a 6-month period. Assume that the payment over this period is steady. The cost per transaction is $55 (b), the interest rate is 5% for the period (i), and the cost per dollar of funds transferred is .04% (v).
1. Calculate the optimal initial cash balance and transfer size
2. Average cash balance
3. The number of transfers
4. The total cost of cash management
Steps to complete the Assignment
Economic Ordering Quality Formula: P=b(T/c)=vT + (c/2)
C stands for Cash Balance, that is what the problem is solving for
Step 1: Calculate the Optimal Initial Cash Balance and Transfer Size
Step 2:Calculate the Total Cost of Cash Management