Response to the following problem:
The Bulldog Company has cash needs of $5 million per month. If Bulldog needs more cash, it can sell marketable securities, incurring a fee of $300 for each transaction. If Bulldog leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment.
a. If Bulldog gets a cash infusion of $1 million each time it needs cash, what are the holding costs associated with its cash investment?
b. If Bulldog gets a cash infusion of $1 million each time it needs cash, what are the transactions costs per month associated its cash infusions?
c. Using the EOQ model, what level of cash infusion minimizes Bulldog's costs associated with cash?