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7-18 Miller-Orr model STIC Corporation uses the Miller-Orr model to manage its cash account. Recently,...

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7-18 Miller-Orr model STIC Corporation uses the Miller-Orr model to manage its cash account. Recently, someone asked how sensitive is the solution for the return point and upper limit to changes in the conversion cost, the variance of daily net cash flows, and the daily opportunity cost rate. The values that are currently being used are a $50 conversion cost, a $2 million daily net cash flow variance, and a 10 percent annual opportunity cost. a. Calculate the return point and upper limit using the current values. b. Simultaneously increase each of the three variable values used in a by 50 percent and recalculate the return point and upper limit. c. Discuss the sensitivity of the model to changes in the values of the input variables

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