As the financial manager of Domino Corp., you want to determine how frequently the company should sell the Treasury bills it owns to cover its day-to-day cash flow needs averaging €15 million a quarter. The annual rate of return on the Treasury bills is 0.4% and it costs €300 each time the company sells bills. Assume that the funds received from selling the bills do not earn any interest.
a) What is the optimum number of times per quarter that Domino should sell the bills?
b) Suppose that Domino could invest its temporary excess cash balances at 0.2%.
What is the optimum number of times per quarter that Domino should sell the bills?