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Ken Soree is the CEO of Black Bear, Inc. Although this firm was only recently incorporated,Kens firm is already struggling. Among the firms many problems, Ken notes that 1)customer demand is low for the firms products, 2) middle management has mis-managed costs, and 3) the liquidity position is far too weak (current cash holdings equal $10,000 and the firm does not have a credit line). Recognizing that Black Bear is quickly falling behind rival firms, Ken hires a consultant to examine the firms liquidity position using . Suppose that Ken provides the firms historical daily cash flows (shown in the table below). Use this information to answer the questions below. Day CF 1 $30,000 2 $5,000 3 $4,000 4 $20,000 5 $7,000 6 $9,000 7 $5,000 8 $1,000 9 $2,500 10 $7,000 a. Use Excel to calculate Black Bears average daily cash flow. b. Use Excel to calculate the standard deviation of Black Bears daily cash flow. c. Calculate Black Bears and the associated probability of illiquidity. d. Assume that an error in accounting reveals that Black Bear really only has $5,000 in cash holdings. Re-calculate Black Bears and the associated probability of illiquidity. e. What do you find interesting about your calculations from part d? What is causing these interesting values?

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