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Miller Orr Model Formula

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Miller Orr Model provides for cost efficient transactional balances and assumes uncertain cashflows and determines an upper limit and return point per cash balances. Check FAQs

Z = 3 \cdot {(\frac{3 \cdot b \cdot σ}{4 \cdot \frac{R}{360}})}^{\frac{1}{3}}

Z - Miller Orr Model?b - Cost of Conversion?σ - Variance?R - Interest Rate?

Miller Orr Model Example

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Here is how the Miller Orr Model equation looks like with Values.

Here is how the Miller Orr Model equation looks like with Units.

Here is how the Miller Orr Model equation looks like.

744.7635 = 3 \cdot {(\frac{3 \cdot 20 \cdot 170}{4 \cdot \frac{0.06}{360}})}^{\frac{1}{3}}

744.7635 = 3 \cdot {(\frac{3 \cdot 20 \cdot 170}{4 \cdot \frac{0.06}{360}})}^{\frac{1}{3}}

744.7635 = 3 \cdot {(\frac{3 \cdot 20 \cdot 170}{4 \cdot \frac{0.06}{360}})}^{\frac{1}{3}}

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Miller Orr Model Solution

Follow our step by step solution on how to calculate Miller Orr Model?

FIRST Step Consider the formula

Z = 3 \cdot {(\frac{3 \cdot b \cdot σ}{4 \cdot \frac{R}{360}})}^{\frac{1}{3}}

Next Step Substitute values of Variables

∴

Z = 3 \cdot {(\frac{3 \cdot 20 \cdot 170}{4 \cdot \frac{0.06}{360}})}^{\frac{1}{3}}

Next Step Prepare to Evaluate

∴

Z = 3 \cdot {(\frac{3 \cdot 20 \cdot 170}{4 \cdot \frac{0.06}{360}})}^{\frac{1}{3}}

Next Step Evaluate

∴

Z = 744.763524183721

LAST Step Rounding Answer

∴

Z = 744.7635

Miller Orr Model Formula Elements

Variables

Miller Orr Model

Miller Orr Model provides for cost efficient transactional balances and assumes uncertain cashflows and determines an upper limit and return point per cash balances.

Symbol: Z

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Miller Orr Model

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.

Symbol: b

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Cost of Conversion

Variance

Variance is a measure of the spread or dispersion of a set of values.

Symbol: σ

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Variance

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.

Symbol: R

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Interest Rate

Other formulas in Cash Management category

Go Cash Budget

CB = TR - TP

Go Baumol's Model

C = \sqrt{\frac{2 \cdot b \cdot t}{R}}

Go Cash Coverage

Cash cov = \frac{EBIT}{Int}

Go Cash Conversion Cycle

CCC = DIO + DSO - DPO

How to Evaluate Miller Orr Model?

Miller Orr Model evaluator uses Miller Orr Model = 3*((3*Cost of Conversion*Variance)/(4*Interest Rate/360))^(1/3) to evaluate the Miller Orr Model, The Miller Orr Model formula is defined as a model which provides for cost efficient transactional balances and assumes uncertain cashflows. It determines an upper limit and return point per cash balances. Miller Orr Model is denoted by Z symbol.

How to evaluate Miller Orr Model using this online evaluator? To use this online evaluator for Miller Orr Model, enter Cost of Conversion (b), Variance (σ) & Interest Rate (R) and hit the calculate button.

FAQs on Miller Orr Model

What is the formula to find Miller Orr Model?

The formula of Miller Orr Model is expressed as Miller Orr Model = 3*((3*Cost of Conversion*Variance)/(4*Interest Rate/360))^(1/3). Here is an example- 744.7635 = 3*((3*20*170)/(4*0.06/360))^(1/3).

How to calculate Miller Orr Model?

With Cost of Conversion (b), Variance (σ) & Interest Rate (R) we can find Miller Orr Model using the formula - Miller Orr Model = 3*((3*Cost of Conversion*Variance)/(4*Interest Rate/360))^(1/3).

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Miller Orr Model Formula

Miller Orr Model Example

Miller Orr Model Solution

Miller Orr Model Formula Elements

Other formulas in Cash Management category

How to Evaluate Miller Orr Model?

FAQs on Miller Orr Model

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