公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter19_Appendi

Appendix 19A

DETERMINING THE TARGET CASH BALANCE

SLIDES

19A.1Chapter 19 Appendix

19A.2Costs of Holding Cash

19A.3The BAT Model – I

19A.4The BAT Model – II

19A.5The BAT Model – III

19A.6The BAT Model – IV

19A.7The Miller-Orr Model

19A.8The Miller-Orr Model: Math

19A.9Implications of the Miller-Orr Model

19A.10I mplications of the Miller-Orr Model (ctd.)

19A.11O ther Factors Influencing the Target Cash Balance

19A.12E nd of Chapter

APPENDIX ORGANIZATION

19A.1 The Basic Idea

19A.2 The BAT Model

19A.3 The Miller-Orr Model: A More General Approach

19A.4 Implications of the BAT and Miller-Orr Models

19A.5 Other Factors Influencing the Target Cash Balance

ANNOTATED APPENDIX OUTLINE

Slide 1: Chapter 19 Appendix

Target cash balance – the desired cash balance as determined by

the trade-off between carrying costs and storage costs

Adjustment costs – costs associated with holding low levels of

cash; shortage costs

With a flexible working capital policy, the trade-off is between the

opportunity cost of cash balances and the adjustment costs of

buying, selling, and managing securities.

19A.1The Basic Idea

Slide 2: Costs of Holding Cash

There is an optimal cash level that minimizes the total costs of

holding cash.

19A.2The BAT (Baumol-Allais-Tobin) Model

Slide 3: The BAT Model – I

Slide 4: The BAT Model – II

Slide 5: The BAT Model – II

Slide 6: The BAT Model – IV

Define:

C = optimal cash transfer amount (amount of marketable securities to

sell to raise cash)

F = fixed cost of selling securities

T = cash needed for transactions over entire planning period

R = opportunity cost of cash (interest rate on marketable securities)

Assume that cash is paid out at a constant rate through time.

Opportunity cost = Average cash balance × Interest rate

= (C ⁄ 2) × R

T rading cost = # of transactions × Cost per transfer = (T ⁄ C) × F

Total cost = Oppor tunity cost + Trading cost = (C ⁄ 2)R + (T ⁄ C)F

To find the optimal transfer amount, take a first derivative of the cost

function relative to C and set it equal to zero. You can also find it by

setting opportunity cost = trading cost and solving for C.

Method 1: Method 2: Example: Hermes Co. has cash outflows of $500 per day, the interest rate is 10% and the fixed transfer cost is $25. T = 365 × 500 = 182,500 F = 25 R = .1

19A.3

The Miller-Orr Model: A More General Approach

Slide 7: The Miller-Orr Model

The Miller-Orr model offers a general approach to handling uncertain

cash flows.

The basic idea:

U * = upper limit on cash balance

L = lower limit on cash balance

C * = target cash balance

R FT C R FT C C FT R C FT R C TC 22202222====-+=∂∂R FT C R TF C F C T R C 2222===49.552,9$1.)500,182)(25(2==C C