Scribd
Upload
1K views4 pages

The Miller-Orr (Model)

This document describes the Baumol cash management model. It defines the key variables in the model - CP is the amount of securities converted to cash, k is the cost of holding cash, a is the fixed cost to convert securities to cash, and T is the planned cash needs over a period. It provides the formula to calculate the optimal amount to convert securities to cash (CP*) which minimizes total cash costs, and provides an example calculation. It then switches to describing the Miller-Orr cash management model, giving the assumptions of the model and showing the calculations to determine the upper and lower cash balance limits and the rules for investing/divesting based on reaching those limits.

Uploaded by

Veve Evelyn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
1K views4 pages

The Miller-Orr (Model)

This document describes the Baumol cash management model. It defines the key variables in the model - CP is the amount of securities converted to cash, k is the cost of holding cash, a is the fixed cost to convert securities to cash, and T is the planned cash needs over a period. It provides the formula to calculate the optimal amount to convert securities to cash (CP*) which minimizes total cash costs, and provides an example calculation. It then switches to describing the Miller-Orr cash management model, giving the assumptions of the model and showing the calculations to determine the upper and lower cash balance limits and the rules for investing/divesting based on reaching those limits.

Uploaded by

Veve Evelyn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

THE BAUMOL MODEL

CP: Jumlah surat berharga yang dikonversikan ke dalam kas.


k : Biaya Penyimpanan Kas
a : Biaya tetap untuk mengkonversi surat berharga menjadi kas.
T : Jumlah kebutuhan kas yang direncanakan dalam periode tertentu.
TB: Total biaya kas
(CP/2) k : biaya penyimpanan kas
(T/CP)a : Total biaya konversi

CP* =

2.T.a
k

2 x 50.000.000 x 37.500

CP* =

No.
A
B
C
D
E
F

5.000.000

15%

Keterangan
Jumlah Konversi Surat Berharga
Konversi per th (50.000.000/A)
Saldo Kas rata-rata (A/2)
Biaya Konversi (B x 37.500)
Biaya Penyimpanan (C x 15%)
Total Biaya (D + E)

Kondisi
1
2
3
4
4.000.000 5.000.000 6.000.000 7.000.000
12,50
10,00
8,33
7,14
2.000.000 2.500.000 3.000.000 3.500.000
468.750 375.000 311.250 267.750
300.000 375.000 450.000 525.000
768.750 750.000 761.250 792.750

Miller-Orr Model
Asumsi:
1. Minimum cash balance = $ 10,000
2. Variance of daily cash flows = $ 6,250,000
3. Interest rata = 0,025% per day
4. Transaction cost for each sale or purchase of securities = $ 20
Calculation of spread between upper and lower cash balance limits:

Spread = 3 (3/4 x transaction cost x variance of cash flows)1/3


interest rate
= 3 (3/4 x 20 x 6,250,000)1/3
0,00025
= $ 21,634, atau $ 21,600
Calculate upper limit and return point:
Upper limit = lower limit + 21,600 = $ 31,600 ($ 10.000 + $ 21.600)
Return point = lower limit + spread/3
= 10,000 + 21,600/3 = $ 17,200
Decision rule: If cash balance rises to $ 31,600, invest $31,600 - $17,200 = $14,400
in marketable securities; if cash balance falls to $ 10,000, sell
$ 7,200 of marketable securities and replenish cash.

The Miller-Orr Model

You might also like