Your banker has analyzed your company account and has suggested that her bank has a cash management package for you. She suggests that with a concentration banking system, your float can be reduced by four days on average. You, of course, are delighted (you're not sure why), but you do know your average daily collections amount to $390,000. Your opportunity cost of funds is 8 percent. The bank provides this service for $61,000 plus a compensating balance in your current account of $83,500. (A compensating balance is the amount you are required to maintain interest free at that bank.) a. Is this package worth it? O Yes O No b. By how much? (Negative answer should be indicated by a minus sign.) Annual Saving

Your banker has analyzed your company account and has suggested that her bank has a cash management package for you. She suggests that with a concentration banking system, your float can be reduced by four days on average. You, of course, are delighted (you're not sure why), but you do know your average daily collections amount to $390,000. Your opportunity cost of funds is 8 percent. The bank provides this service for $61,000 plus a compensating balance in your current account of $83,500. (A compensating balance is the amount you are required to maintain interest free at that bank.) a. Is this package worth it? O Yes O No b. By how much? (Negative answer should be indicated by a minus sign.) Annual Saving

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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