A firm has daily cash receipts through checks. On average 150 checks are received per day while each check has an average value of P2,500. It takes an average of 3 days for the bank to clear the checks. A bank has offered to decrease the clearing period to one day for a monthly fee of P500. The bank gives an interest rate of 3% per year. 18. How much would the average cash in bank balance increase by if the ABC took the bank’s offer? 19. How much would ABC receive as total annual interest on the freed cash? 20. How much is the annual cost of the service? 21. What is the annual net benefit or (loss) from having this service?

A firm has daily cash receipts through checks. On average 150 checks are received per day while each check has an average value of P2,500. It takes an average of 3 days for the bank to clear the checks. A bank has offered to decrease the clearing period to one day for a monthly fee of P500. The bank gives an interest rate of 3% per year. 18. How much would the average cash in bank balance increase by if the ABC took the bank’s offer? 19. How much would ABC receive as total annual interest on the freed cash? 20. How much is the annual cost of the service? 21. What is the annual net benefit or (loss) from having this service?

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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Rosita Flores owns Rositas Mexican Restaurant in Tempe, Arizona. Rositas is an affordable restaurant near campus and several hotels. Rosita accepts cash and checks. Checks are deposited immediately. The bank charges 0.50 per check; the amount per check averages 75. Bad checks that Rosita cannot collect make up 3 percent of check revenue. During a typical month, Rositas has sales of 45,000. About 80 percent are cash sales. Estimated sales for the next three months are as follows: Required: Prepare a schedule of cash receipts for May and June. (Round all amounts to the nearest dollar.)
A firm has daily cash receipts through checks. On average 150 checks are received per day while each check has an averagevalue of P2,500. It takes an average of 3 days for the bank to clear the checks. A bank has offered to decrease the clearingperiod to one day for a monthly fee of P500. The bank gives an interest rate of 3% per year. 1. How much is the decrease of the clearing float in days? 2. How much is the annual cost of the service? 3. What is the annual net benefit or (loss) from having this service?
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