Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Question
Chapter 30, Problem 23PS
Summary Introduction
To determine: Minimum amount needed to justify a wire transfer.
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Example
One of the companies adopts a central system for the payment of
payment bills through the general administration, and this requires
an average of 4 days for the checks to reach the customers as well
as
1,5
The day of registration of checks before they are deposited in the
bank, and the average company receipts are 500 thousand dinars
per day. The company is studying the possibility of using mailboxes
through renting, and this will reduce the time for mailing checks by
an amount
2,5
day, and the time required to prepare checks for deposit is reduced
by one day. Required:
1. What is the amount of cash that can be released in this process?
2. Determine the alternative cost of the released funds if the return
on financial instruments
Short term 5%?
3. Is it feasible to use this system when considering the alternative
cost?
For the liberated money, if the costs of the local mailbox system are
75,000 dinars annually?
4. ABC Co. has received proposals from several banks to establish a lockbox system to speed up receipts. The firm
receives an average of 700 checks per day averaging P1, 800 each and its cost of short term funds is 7% per
year. If all proposals will produce equivalent processing results, which bank proposed charges is best 2 be
adopted?
A. A fee of .03% of the amount collected
B. P.50 fee per check
C. a compensating balance of P1, 750, 000
D. a flat fee of P125, 000 a year
The firm's bank charges $18 per wire and $0.50 per EDT. The EDT takes one day longer to clear. The investment opportunity rate is 4%. The bank's Earnings credit rate is 0.5% on account balances. The RRR is 10%. What is the minimum transfer balance that justifies a wire transfer?
Step by step explanation needed with correct answer.
Chapter 30 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 2PSCh. 30 - Prob. 3PSCh. 30 - Prob. 4PSCh. 30 - Prob. 5PSCh. 30 - Prob. 6PSCh. 30 - Prob. 7PSCh. 30 - Credit policy How should your willingness to grant...Ch. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 10PS
Ch. 30 - Prob. 11PSCh. 30 - Prob. 12PSCh. 30 - Prob. 13PSCh. 30 - Prob. 14PSCh. 30 - Credit terms Phoenix Lambert currently sells its...Ch. 30 - Prob. 16PSCh. 30 - Prob. 17PSCh. 30 - Prob. 18PSCh. 30 - Prob. 19PSCh. 30 - Prob. 20PSCh. 30 - Prob. 21PSCh. 30 - Prob. 22PSCh. 30 - Prob. 23PSCh. 30 - Prob. 24PSCh. 30 - Prob. 25PSCh. 30 - Money-market yields In Section 30-4 we described a...Ch. 30 - Money-market yields Look again at the previous...Ch. 30 - Prob. 29PSCh. 30 - Prob. 30PSCh. 30 - Prob. 31PSCh. 30 - Prob. 33PS
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