Veggie Burgers, Inc., would like to maintain its cash account at a minimum level of $246,400; but expect the standard deviation in net daily cash flows to be $13,600; the effective annual rate on marketable securities to be 4.8 percent per year; and the trading cost per sale or purchase of marketable securities to be $28 per transaction.



Required:
What will be its optimal cash return point? (

Icant find a complete formula anywhere

To determine the optimal cash return point for Veggie Burgers, Inc., you can use the Miller-Orr Model, which calculates the point at which the company should replenish its cash balance. The formula to find the optimal cash return point is as follows:

Z = 3 √(3/4 * (Tc * D / r))

Where:
Z = Optimal cash return point
Tc = Trading cost per sale or purchase of marketable securities ($28)
D = Standard deviation in net daily cash flows ($13,600)
r = Effective annual rate on marketable securities (4.8% expressed as a decimal)

Plugging in the given values, we can calculate the optimal cash return point:

Z = 3 √(3/4 * (28 * 13,600 / 0.048))

Solving this equation, we get:

Z = 3 √(3/4 * 374,400)

Z = 3 √(280,800)

Z ≈ 3 * 142.57

Z ≈ 427.71

Therefore, the optimal cash return point for Veggie Burgers, Inc. would be approximately $427,710.

To determine the optimal cash return point for Veggie Burgers, Inc., we need to calculate the Economic Order Quantity (EOQ) and the cash conversion cycle.

The cash conversion cycle is the length of time it takes for a company to convert its investments in inventory and other resources into cash generated from sales. It consists of three components: the inventory conversion period, the receivables conversion period, and the payables deferral period.

1. Inventory Conversion Period (ICP):
This is the average number of days it takes for Veggie Burgers, Inc., to convert its inventory into sales. Since the question doesn't provide this information, let's assume it as 30 days.

2. Receivables Conversion Period (RCP):
This is the average number of days it takes for Veggie Burgers, Inc., to collect payment from its customers. Since the question doesn't provide this information, let's assume it as 45 days.

3. Payables Deferral Period (PDP):
This is the average number of days it takes for Veggie Burgers, Inc., to pay its suppliers. Since the question doesn't provide this information, let's assume it as 15 days.

Now, we can calculate the Cash Conversion Cycle (CCC) using the formula:
CCC = ICP + RCP - PDP
CCC = 30 + 45 - 15
CCC = 60 days

Next, we can calculate the optimal cash return point using the formula:
Optimal Cash Return Point = Cash Conversion Cycle × Standard Deviation of Daily Cash Flows × (1 + Effective Annual Interest Rate / Trading Cost per Transaction)
Optimal Cash Return Point = 60 × $13,600 × (1 + 0.048 / $28)

By plugging in the values, we can calculate the Optimal Cash Return Point for Veggie Burgers, Inc.