Touchdown Co. has a lower limit of cash of $1,000 set by management. The variance of the cash flows is $2,500, with a fixed cost of $25 to buy or sell marketable securities. The interest rate earned on marketable securities is .023% per day.
a) What is the target cash balance?
b) What is the upper limit of cash?
c) Give a brief description of how the cash balance will be managed.