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Publish On: 2019-05-18

Andy More

Total Post: 752

Question: What premises should necessary for Baumol’s Cash Model?

Reply On: 2013-06-22

Priancka

Total Post: 8

ANS: What premises should necessary for Baumol’s Cash Model?

The Baumol’s model makes the following assumption 1. The firm is able to forecast its cash need with certainty. 2. The firm’s cash payments occur uniformly over a period of time. 3. The opportunity cost of holding cash is known and it does not change over time. 4. The firm will incur the same transaction cost whenever it converts securities to cash.

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