IBM receives a constant flow of funds from its worldwide operations. This money in the form of cheques) is deposited continuously in many banks with the goal of earning as much interest as possible for IBM. One billion dollars is deposited cach month, and the money earns an average of 0.5% interest a month, com- pound continuously. Assume all the money remains in the accounts until the end of the month, (a) How much interest does IBM cam each month? (b) How much interest would IBM earn each month if it held the cheques and made deposits to its bank counts just four times a month?

IBM receives a constant flow of funds from its worldwide operations. This money in the form of cheques) is deposited continuously in many banks with the goal of earning as much interest as possible for IBM. One billion dollars is deposited cach month, and the money earns an average of 0.5% interest a month, com- pound continuously. Assume all the money remains in the accounts until the end of the month, (a) How much interest does IBM cam each month? (b) How much interest would IBM earn each month if it held the cheques and made deposits to its bank counts just four times a month?

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

See similar textbooks

Similar questions

IBM receives a constant flow of funds from its worldwide operations. This money in the form of cheques) is deposited continuously in many banks with the goal of earning as much interest as possible for IBM. One billion dollars is deposited cach month, and the money earns an average of 0.5% interest a month, com- pound continuously. Assume all the money remains in the accounts until the end of the month, (a) How much interest does IBM cam each month? () How much interest would IBM earn each month if it held the cheques and made deposits to its bank counts just four times a month?
Suppose that LilyMac Photography has annual sales of $233,000, cost of goods sold of $168,000, average inventories of $4,800, average accounts receivable of $25,600, and an average accounts payable balance of $7,300.Assuming that all of LilyMac’s sales are on credit, what will be the firm’s cash cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
When he became the president of Jem Incorporated, John Smith changed the date of the weekly payday from the end of the day on Monday to the end of the day on Friday. The company has a weekly payroll of $10 million, and the cost of short-term funds was 13%. If this change delayed check clearing by 1 week, what annual savings were realized? Use the information below for the next two problems. Schlitz Inc. has obtained a 90-day bank loan of $10,000 with an annual interest rate of 15%, payable at maturity. Assume a 365-day year.
If a firm has sales of $23,920,000 a year, and the average collection period for the industry is 60 days, what should this firm’s accounts receivable be if the firm is comparable to the industry? Assume there are 365 days in a year. Do not round intermediate calculations. Round your answer to the nearest dollar. $
ABC Corporation receives checks from its customers. The total check value averages 700,000 each day. It takes an average of 5 days from deposits for these to clear the bank. If the bank offers to accelerate the 5-day clearing process to 3 days for a monthly fee of 600. If ABC can earn 4% investment income from excess cash, how much is the net annual benefits/cost of this bank offer?
A firm has no cash sales (all sales are on credit and are collected 28 days after the sale). If the receivables are $167,000, what is the level of sales? Assume there are 365 days in a year. Round your answer to the nearest dollar. $
Suppose you deposited $41,000 in a bank account that pays 5.75% with daily compounding based on a 360-day year. How much would be in the account after 8 months, assuming each month has 30 days? a. $42,598.28 b. $42,571.67 c. $43,426.30 d. $42,793.66 e. $42,602.05
You have $5,000 invested in a bank that pays 4.8% interest, compounded weekly. How many weeks will it take for your funds to triple? (please solve using Microsoft excel)
The George Company has a policy of maintaining an end-of-month cash balance of at least $30,000.In months where a shortfall is expected, the company can draw in $1,000 increments on a line ofcredit it has with a local bank, at an interest rate of 12% per annum. All borrowings are assumed forbudgeting purposes to occur at the beginning of the month, while all loan repayments (in $1,000increments of principal) are assumed to occur at the end of the month. Interest is paid at the end ofeach month. For April, an end-of-month cash balance (prior to any financing and interest expense)of $18,000 is budgeted; for May, an excess of cash collected over cash payments (prior to any interest payments and loan repayments) of $22,000 is anticipated. What is the interest payment estimatedfor April (there is no bank loan outstanding at the end of March)? What is the total financing effect(cash interest plus loan transaction) for May?
To establish a "rainy day" cash reserve account, a certain company deposits $11,000 of its profit at the end of each quarter into a money market account that pays 1.95% interest compounded quarterly. (Round your answers to the nearest cent.) (a) How much (in $) will the account be worth in 2 years? (b) How much (in $) will the account be worth in 3 1/2 years?
Cline Corporation deposits $75,000 every quarter in a savings account (beginning at the end of the current quarter) for the next six years so that it can purchase a new piece of machinery at the end of six years. The interest rate is 4%. How much money will Cline Corporation have at the end of six years? (Use spreadsheet software or a financial calculator to calculate your answer. Do not round any intermediary calculations, and round your final answer to the nearest dollar.) Group of answer choices $2,043,240 $2,023,010 $2,931,195 $1,126,935
General Products writes checks that average $33,000 daily. These checks take an average of 6 days to clear. It receives payments that average $35,000 daily. It takes 3 days before these checks are available to the firm. What would be the annual savings if General Products could obtain access to the payments it receives within 2 days? The interest rate is 5% per year. (Do not round intermediate calculations.)