Problem:
Throughout the course of the year, my various projects will require a total amount of cash of $4,000,000. The interest cost for this requirement is 9.75%, while each transaction costs $100 to complete. What is my EOQ? How often should I order? What is my average cash balance? What is my total cost through the course of the year? Would my average cash balance be different if I were required to maintain a $5,000 cash buffer at all times? If so, what would it be?