City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 4 percent per annum. a. If City Farm has $4.60 million per day in collections and $3.60 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Freed up funds?___________ b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? Interest on freed-up cash

City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 4 percent per annum. a. If City Farm has $4.60 million per day in collections and $3.60 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Freed up funds?___________ b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? Interest on freed-up cash

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. If City Farm has $4.90 million per day in collections and $3.90 million per day in disbursements, how many dollars has the cash management system freed up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? Note: Enter your answer in dollars not in millions (e.g., $1,234,567).
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If City Farm has $4.30 million per day in collections and $3.30 million per day in disbursements, how many dollars has the cash management system freed up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Freed-up funds b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Interest on freed-up cash
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If City Farm has $4.30 million per day in collections and $3.50 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions (e.g., $1,234,567).) 1 Freed-up funds $ b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Interest on freed-up cash $ 275,000
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers. Collection time has been reduced by two days and disbursement time increased by one day because of these policies. Excess funds are being invested in short-term instruments yielding 12 percent per annum. If City Farm has $5 million per day in collections and $3 million per day in disbursements, how many dollars has the cash management system freed up? How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash?
Sheila's Society Clothing Manufacturer has collection centres around the country to speed up cash collections. The company also makes its disbursements from remote disbursement centres, so cheques written by Sheila's take longer to clear the bank. Collection time has been reduced by three days and disbursement time has been increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If the firm has $4.20 million per day in collections and $3.20 million per day in disbursements, how many dollars has the cash management system freed up? (Enter the answer in dollars not in millions.) Freed-up funds b. How much can Sheila's earn per year on short-term investments made possible by the freed-up cash? (Enter the answer in dollars not in millions.) Interest on freed-up cash $
Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Inc. is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? P28,455P22,985P25,750P21,875
Bulldogs Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Bulldogs is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? P22,985 P25,750 P28,455 P21,875
Bulldogs Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Bulldogs is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? A. P25,750 B. P21,875 C. P22,985 D. P28,455
It takes Cookie Cutter Modular Homes, Incorporated, about six days to receive and deposit checks from customers. The company’s management is considering a lockbox system to reduce the firm’s collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are $136,000 and the required rate of return is an EAR of 6 percent. Assume 365 days per year. a. What is the reduction in the outstanding cash balance as a result of implementing the lockbox system? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the daily dollar return that could be earned on these savings? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c-1. What is the maximum monthly charge the company should pay for this lockbox system if the payment is due at the end of the month? (Do not round intermediate calculations and…
Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 880 $830 $.10 3.2% a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $3,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely…
Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 850 $ 800 $.10 a. NPV b. NPV 3.2% a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $3,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
It typically takes Law Corporation 8 days to receive and deposit customer remissions. Law is considering a lockbox system and anticipates that the system will reduce the float time to 5 days. Average daily cash receipts are P220,000. The rate of return is 10 percent. Requirement: What is the reduction in cash balances associated with implementing the system? What is the rate of return associated with the earlier receipt of the funds? What should be the maximum monthly charge associated with the lockbox proposal?