Problem:
Veggie Burgers, Inc., would like to maintain their cash account at a minimum level of $200,000; but expect the standard deviation in net daily cash flows to be $1,000; the effective annual rate on marketable securities to be 4.7 percent per year; and the trading cost per sale or purchase of marketable securities to be $27 per transaction.
Required:
Question: What will be their optimal cash return point?
- $205,436.90
- $211,907.63
- $219,003.48
- $223,057.14
Note: Please show how you came up with solution.