Question

10. The annual cash requirement of A Ltd is 1000000. The company
has marketable securities in lot size of 50000, 100000, 200000,
250000 and 500000. Cost of conversion of marketable security per
lot 1000. The company can earn 5% annual yield on its securities.
You are required to prepare a table indicating which lot size will
have to be sold by the company. Also, show that the economic lot
size can be obtained by the Baumol Model
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Answer 1

Explanation:

10. The annual cash requirement of A Ltd is 1000000. The company

has marketable securities in lot size of 50000, 100000, 200000,

250000 and 500000. Cost of conversion of marketable security per

lot 1000. The company can earn 5% annual yield on its securities.

You are required to prepare a table indicating which lot size will

have to be sold by the company. Also, show that the economic lot

size can be obtained by the Baumol Model

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