QUESTION 8 The cost of being in overdraft is 11%(10.5%+0.5%), which is < the marginal yield on long- term investments of 14%. It is therefore beneficial for Flush to be in OVErdraFt 3 x conversion cost x variance of daily net cash fows Return point 4×( daily op st- daily overdraft rate 3×$250×$160002 0.14-0.11 4 365 =$83587 U=$0 L=3× retur 3×S83587 below u S250 761 below U =-$250761 Return point=$83 587 above L -$l67174August 2003 QUESTION 8 The cost of being in overdraft is 11% (10.5% + 0.5%), which is < the marginal yield on long￾term investments of 14%. It is, therefore, beneficial for Flush to be in OVERDRAFT. ( ) $83587 365 0.14 - 0.11 4 3 $250 $16 000 4 daily opportunit y cost - daily overdraft rate 3 conversion cost variance of daily net cash flows Return point 3 2 3 =          =    = U = $0 = - $250 761 = $250 761below U = 3 $83587 below U L = 3 return point below U   = - $167174 Return point = $83587 above L