The Polk Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Polk's customers. Polk's financial manager believes the new system woulddecrease its collection float by as much as 7 days. The new bank would require a compensating balance of $23 000, whereas its present bank has no compensating balance requirement. Saban'saverage daily collections are $11 000, and it can earn 8% on its short-term investments. Should Polk make the switch? (Assume the compensating balance at the new bank will be deposited ina non-interest-earning account.)As a result of using the electronic funds transfer system, the amount of collection float freed up by the loan is $(Round to the nearest dollar.)

Collection period is the period required to receive cash amount from customersIt is given…

The Polk Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Polk's customers. Polk's financial manager believes decrease its collection float by as much as 7 days. The new bank would require a compensating balance of $23 000, whereas its present bank has no compensating balance average daily collections are $11 000, and it can earn 8% on its short-term investments. Should Polk make the switch? (Assume the compensating balance at the new bank v a non-interest-earning account.) As a result of using the electronic funds transfer system, the amount of collection float freed up by the loan is $ (Round to the nearest dollar.)

The Polk Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Polk's customers. Polk's financial manager believes decrease its collection float by as much as 7 days. The new bank would require a compensating balance of $23 000, whereas its present bank has no compensating balance average daily collections are $11 000, and it can earn 8% on its short-term investments. Should Polk make the switch? (Assume the compensating balance at the new bank v a non-interest-earning account.) As a result of using the electronic funds transfer system, the amount of collection float freed up by the loan is $ (Round to the nearest dollar.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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