he Seminole Company wishes to apply the Miller-Orr model to manage its cash investment. Seminole’s management has collected the following estimates:

Cost per transaction

= $200

Variance of daily cash flows

= $10,000

Opportunity cost of cash, per day

= 0.05%

Seminole management has figured, based on their experience dealing with the cash flows of the company, that there should be a cushion— a safety stock—of cash of $20,000. Calculate the following:

a. the lower limit

b. the return point

c. the upper limit