LCM of two numbers

Baumol's Model Calculator

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✖Cost of Conversion is the sum of direct labor and manufacturing overhead costs incurred to turn raw materials into a finished product.ⓘ Cost of Conversion [b]			+10% -10%
✖Total Requirement of Cash is the total amount of funds that a buyer must deliver to close on a mortgage or to finalize a refinance of an existing property.ⓘ Total Requirement of Cash [t]			+10% -10%
✖Interest Rate is the amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.ⓘ Interest Rate [R]			+10% -10%

✖Cost of Providing a Service refers to the total expenditure required to maintain a certain level of service provision over a period of time.ⓘ Baumol's Model [C]

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Baumol's Model Solution

STEP 0: Pre-Calculation Summary

Formula Used

Cost of Providing a Service = sqrt((2*Cost of Conversion*Total Requirement of Cash)/Interest Rate)
C = sqrt((2*b*t)/R)
This formula uses 1 Functions, 4 Variables

Functions Used

sqrt - A square root function is a function that takes a non-negative number as an input and returns the square root of the given input number., sqrt(Number)

Variables Used

Cost of Providing a Service - Cost of Providing a Service refers to the total expenditure required to maintain a certain level of service provision over a period of time.
Cost of Conversion - Cost of Conversion is the sum of direct labor and manufacturing overhead costs incurred to turn raw materials into a finished product.
Total Requirement of Cash - Total Requirement of Cash is the total amount of funds that a buyer must deliver to close on a mortgage or to finalize a refinance of an existing property.
Interest Rate - Interest Rate is the amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.

STEP 1: Convert Input(s) to Base Unit

Cost of Conversion: 20 --> No Conversion Required
Total Requirement of Cash: 30 --> No Conversion Required
Interest Rate: 0.06 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

C = sqrt((2*b*t)/R) --> sqrt((2*20*30)/0.06)

Evaluating ... ...

C = 141.42135623731

STEP 3: Convert Result to Output's Unit

141.42135623731 --> No Conversion Required

FINAL ANSWER

141.42135623731 ≈ 141.4214 <-- Cost of Providing a Service

(Calculation completed in 00.004 seconds)

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BMS College of Engineering (BMSCE), Bangalore

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< Cash Management Calculators

Baumol's Model

LaTeX Go Cost of Providing a Service = sqrt((2*Cost of Conversion*Total Requirement of Cash)/Interest Rate)

Miller Orr Model

LaTeX Go Miller Orr Model = 3*((3*Cost of Conversion*Variance)/(4*Interest Rate/360))^(1/3)

Cash Coverage

LaTeX Go Cash Coverage = Earnings before Interest and Taxes/Interest Expense

Cash Budget

LaTeX Go Cash Budget = Total Receipts-Total Payments

Baumol's Model Formula

LaTeX Go

Cost of Providing a Service = sqrt((2*Cost of Conversion*Total Requirement of Cash)/Interest Rate)
C = sqrt((2*b*t)/R)

Baumol Model

Baumol developed a model which is usually used in inventory management and cash management. It trade off between opportunity cost or carrying cost or holding cost and the transaction cost. The firm attempts to minimize the sum of the holding cash and the cost of converting marketable securities to cash.

How to Calculate Baumol's Model?

Baumol's Model calculator uses Cost of Providing a Service = sqrt((2*Cost of Conversion*Total Requirement of Cash)/Interest Rate) to calculate the Cost of Providing a Service, The Baumol's Model formula is defined as a model which provides for cost efficient transactional balances and assumes that the demand for cash can be predicted with certainty. It determines the optimal conversion size. Cost of Providing a Service is denoted by C symbol.

How to calculate Baumol's Model using this online calculator? To use this online calculator for Baumol's Model, enter Cost of Conversion (b), Total Requirement of Cash (t) & Interest Rate (R) and hit the calculate button. Here is how the Baumol's Model calculation can be explained with given input values -> 141.4214 = sqrt((2*20*30)/0.06).

FAQ

What is Baumol's Model?

The Baumol's Model formula is defined as a model which provides for cost efficient transactional balances and assumes that the demand for cash can be predicted with certainty. It determines the optimal conversion size and is represented as C = sqrt((2*b*t)/R) or Cost of Providing a Service = sqrt((2*Cost of Conversion*Total Requirement of Cash)/Interest Rate). Cost of Conversion is the sum of direct labor and manufacturing overhead costs incurred to turn raw materials into a finished product, Total Requirement of Cash is the total amount of funds that a buyer must deliver to close on a mortgage or to finalize a refinance of an existing property & Interest Rate is the amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.

How to calculate Baumol's Model?

The Baumol's Model formula is defined as a model which provides for cost efficient transactional balances and assumes that the demand for cash can be predicted with certainty. It determines the optimal conversion size is calculated using Cost of Providing a Service = sqrt((2*Cost of Conversion*Total Requirement of Cash)/Interest Rate). To calculate Baumol's Model, you need Cost of Conversion (b), Total Requirement of Cash (t) & Interest Rate (R). With our tool, you need to enter the respective value for Cost of Conversion, Total Requirement of Cash & Interest Rate and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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