Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one- half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon Light Company has $3.10 million per day in collections and $1.22 million per day in disbursements, how many dollars will the cash management system free up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Freed-up funds b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Interest on freed-up cash c. If the total cost of the new system is $485,000, should it be implemented?

Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one- half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon Light Company has $3.10 million per day in collections and $1.22 million per day in disbursements, how many dollars will the cash management system free up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Freed-up funds b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Interest on freed-up cash c. If the total cost of the new system is $485,000, should it be implemented?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 6P

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Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by one and one-half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon Light Company has $2.30 million per day in collections and $1.06 million per day in disbursements, how many dollars will the cash management system free up? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Freed-up funds b. If Neon Light Company can earn 9 percent per annum on freed-up funds, how much will the income be? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Interest on freed-up cash c. If the total cost of the new system is $405,000, should it be…
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