5. Determining Optimal Cash Balances The All Day Company is currently hold- ing $690,000 in cash. It projects that over the next year its cash outflows will ex- ceed cash inflows by $140,000 per month. How much of the current cash holdings should be retained, and how much should be used to increase the company’s hold- ings of marketable securities? Each time these securities are bought or sold through a broker, the company pays a fee of $250. The annual interest rate on money market securities is 3.2 percent. After the initial investment of excess cash, how many times during the next 12 months will securities be sold?
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