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%. XYZ Corporation agreed with

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%. XYZ Corporation agreed with

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 29P

See similar textbooks

Similar questions

The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenue-producing investments, together with annual rates of return, are as follows: The credit union will have 2 million available for investment during the coming year. State laws are credit union policies impose the following restrictions on the composition of the loans and investments: Risk-free securities may not exceed 30% of the total funds available for investment. Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans). Furniture loans plus other secured loans may not exceed the automobile loans. Other secured loans plus signature loans may not exceed the funds invested in risk-free securities. How should the 2 million be allocated to each of the loan/investment alternatives to maximize total annual return? What is the projected total annual return?
ABC Corporation has a daily collection of 180,000 from a selected foreign customer group. The bank offered to accelerate the clearing time of these collections from 8 days to 5 days for a quarterly fee of 1,000. ABC can invested freed cash into a mutual fund to earn 5% annually. How much is the net benefit/cost of this bank service?
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
No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $3.4 million in collections per day and requires a $320,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $1.7 million of collections per day, and each requires a compensating balance of $175,000. No More Books’s financial management expects that collections will be accelerated by one day if the eastern region is divided. a. What is the NPV of accepting the system? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. What will be the annual net savings? Assume that the T-bill rate is 2.5 percent annually.
Beasley Enterprises has an agreement with Downtown Bank whereby the bank handles $1.02 million in collections a day and requires a $750,000 compensating balance. Beasley is contemplating cancelling the agreement and dividing its eastern region so that two other banks would handle its business. Banks A and B would each handle $.51 million of collections per day and each requires a compensating balance of $400,000. Collections should be accelerated by one day if the eastern region is divided. The T-bill rate is 2.97 percent annually. What is the amount of the annual net savings if this plan is adopted?
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
Bowl Corporation has obtained a line of credit facility of $1 million from Plate Bank at 6% interest per annum to meet its $900,000 capital requirement. The capital is needed by Bowl Corporation for 100 days. The bank requires a 2% commitment fee and $50,000 compensating balance. Compute the amount of interest that has to be paid by Bowl Corporation to the bank for the line of credit.
No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles $4.7 million in collections a day and requires a $470,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $2.35 million of collections a day, and each requires a compensating balance of $245,000. No More Books’ financial management expects that collections will be accelerated by one day if the eastern region is divided. a. What is the NPV of accepting the system? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What will be the annual net savings? Assume that the T-bill rate is 2.6 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g.,…
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
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
Inc. deals with various clients throughout the city and is attempting to collect its accounts receivable more efficiently. A major bank has offered a lock-box system for Bulldogs at a cost of P180,000 per year. Inc. averages 300 receipts daily at an average of P5,000 each. Short-term interest is at 8% annually. What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)
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?