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The Cowboy Bottling Company will generate $16 million in credit sales next year. Collection of these credit sales will occur evenly over this period. The firm's employees work 300 days a year. Currently, the firm's processing system ties up 6 days' worth of remittance checks. A recent report from a financial consultant indicated procedures that will enable Cowboy Bottling to reduce processing float by 2 full days. If Cowboy invests the released funds to earn 6 percent, what will be the annual savings?
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- Halliday Inc. receives a $2 million payment once a year. Of this amount, $700,000 is needed for cash payments made during the next year. Each time Halliday deposits money in its account, a charge of $2.00 is assessed to cover clerical costs. If Halliday can hold marketable securities that yield 5 percent, and then convert these securities to cash at a cost of only the $2 deposit charge, what is the total cost for one year of holding the minimum cost cash balance according to the Baumol model?Cow Chips, Incorporated, a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast A Philadelphia-area bank will provide this service for an annual fee of $12,000 pald at the end of the year plus 5 cents per transaction. The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year, and there are 365 days per year. If the average customer payment in this region is $5,900, how many customers each day, on average, are needed to make the system profitable for Cow Chips? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Number of customers per dayKnob, Inc., is a nationwide distributor of furniture hardware. The company now uses a central billing system for credit sales of $198.00 million annually. First National, Knob’s principal bank, offers to establish a new concentration banking system for a flat fee of $150,000 per year. The bank estimates that mailing and collection time can be reduced by four days. Assume a 360-day year. By how much will Knob’s cash balances be increased under the new system? (Enter your answer in dollars not in millions.) Assume that the borrowing rate is 12%. How much extra interest income will the new system generate if the extra funds are used to reduce borrowing under Knob’s line of credit with First National? (Enter your answer in dollars not in millions.) Calculate the total annual cost of the old system if collection costs under the old system are $45,000 per year? (Enter your answer in dollars not in millions.)
- Osborne Supply Company has credit sales of $2M per year. Collections average $8000 per day. Assume there are 250 working days per year. Osborne plans to reduce internal processing time by 1 day. What would its annual savings be, assuming a 14% cost of funds? SolutionYour company will generate GH¢ 55,000 in annual revenue each year for the next eight years from a new information database. The computer system needed to set up the database costs GH¢ 250,000. If you can borrow the money to buy the computer system at 7.5 percent annual interest, can you afford the new system? First National Bank charges 7.5 percent compounded quarterly on its business loans. First United Bank charges 7.5 percent compounded semi-annually. As a potential borrower, which bank would you go to for a new loan?Smith 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. Smith 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. 22,985 B. 28,455 C. 25,750 D. 21,875
- A supermarket is planning on piloting a self-checkout system in one of its stores. It estimates that this requires an investment of about $50,000 to modify existing checkout lanes into self-checkout lanes. It also estimates that it will save $200,000 yearly in employee salaries by automating the checkout process. If the supermarket's MARR is at 10% per year compounded annually, determine the Conventional- payback period (in years) for this pilot.Complete the problems below. 1. A company will need $40,000 in four years for a new addition. To meet the goal, the company will deposit money into an account paying 6% annual interest, compounded monthly. How much should the company deposit each month in order to be able to pay for the addition? Looking at a couple of scenarios to compare to the initial investment (above): a. Exactly 20 months after the company begins their investment (above), they receive a payment from a settled lawsuit of $2000 that they immediately deposit into the account. If they continue, uninterrupted, with their monthly deposits, will the company be able to afford to add a skylight to the addition if the change order (the amount added to the original cost of $40,000) is $3000? If yes, how much, if any would be left over? If no, how much more money will they need? b. Suppose that instead of depositing the money monthly for five years, they decide to finance the addition (the original $40,000) for four years at…The XYZ customer service branch maintains a disbursement account which is funded by the main office. The branch needs funds for daily disbursements of P40,000 and a minimum balance of P20,000. The cost to transfer funds from the main office to the branch averages P300. The return on money marketable securities is 5%. If the entity uses a 250-day year for financial analysis, how much is the optimal cash amount to be requested by the branch each time?
- 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 P21,875Accusoft Systems is offering small business owners a software package that keeps track of many accounting functions from bank transactions to sales invoices. The site license will cost $58,000 to install and will require a fee of $4500 every 3 months. If your company can save $13,500 every quarter and have the security of managing its books in-house, how long will it take for you to recover the investment at an interest rate of 8% per quarter? The time taken to recover the investment is determined to be quarters.Buccaneer, Inc., has determined that it needs $10,000,000 in cash per week. If Buccaneer needs additional cash, it can sell marketable securities, incurring a fee of $100 for each transaction. If Buccaneer leaves funds in its marketable securities, it expects to earn approximately 0.2% per week on their investment. Using the economic order quant ity model, how much cash should Buccaneer raise from selling securities each week to minimize its costs of cash?