A company must meet the following payment for suppliers’ invoices for cash at the beginning of each of the next six months: Month XXXXXXXXXXPayment $200 $100 $50 $80 $160 $140 At the beginning of...

Here we can find total bills amount due in 6 months = 730
Total bonds available = 700
Cash available = 150
Total = 850
Since surplus amount is available there will not be any problem in paying the amounts due in correct time.
The only qestion is which bond is to be closed which month so that total penalty is kept to the minimum
We find in I month 200 is bill amount whereas cash available is only 150. Hence we have to sell atleast one bond to meet this expense.
I month we find penalty is 0.07, 0.17 and 0.11 for bond 1,2,3 respectively
In order to minimize cost we select the least penalty i.e. 0.07 for bond I
Penalty = 200*0.07 = 14 $. Redeemed amount = 200-14 = 186 $
With this 186+150 cash, we can meet first month bill 200 easily. Balance cash = 136 dollars
Second month only 100 dollars is bill amount and this can be paid from cash 136 $
Third month only 50 dollars is bill amount and cannot be adjusted with remaining 36 dollars cash.
Though 3rd month penalty is less for 100 dollars we find 4th, 5th 6th months are decreasing for 100 dollars whereas it is constant of 0.33 for 400 dollars
So it is wise to sell 400 dollars bond now.
Hence 400 dollars can be sold with penalty 400*0.33 = 132 and with this available cash would be
400-132+36 = 304 dollars
With this amount 4th, 5th months bills can be paid easily with balance cash 304-(80+160) = 64 dollars
Now 100 dollars no penalty so can be sold with cash balance =64+100 = 164
Now 6th month 140 can be paid with available cash now 24 dollars
Thus total...