Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined thatthrough the establishment of local collection centers around the country, she can speed up the collection of payments by one andone-half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments onher 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 thecash management system free up? (Enter your answer in dollars not in millions (e.g., $1,234,567).)Freed-up fundsb. If Neon Light Company can earn 9 percent per annum on freed-up funds, how much will the income be? (Enter your answer indollars not in millions (e.g., $1,234,567).)Interest on freed-up cashc. If the total cost of the new system is $405,000, should it be implemented?O NoO Yes

Freed up funds refers to the release or availability of previously committed funds that can now be…

Answered: Neon Light Company of Kansas City ships…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 12P

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Aurora Electrical Cormpany of Yellowknife ships wind turbines throughout the country. Mr. Beam, the financial manager, has determined that through the establishment of local collection centres around the country, he can speed up the collection of payments by two days Furthermore, the cash management department of the company's bank has indicated to him that he can defer payments on his accounts by one day without offending suppliers. The bank has a remote disbursement centre in New Brunswick. a. If Aurora Electrical Company has $1.5 million per day in collections and $0.8 million per day in disbursements, how many dollars will the cash management system free up? (Enter the answer in dollars not in millions.) Freed-up funds S (6760000 b. If Aurora Electrical Company can earn 4 percent per annum on freed-up funds, how much income can be generated? (Enter the answer in dollars not in millions.) Interest on freed-up cash 473000 c. If the total cost of the system is $125,000, should it be…
Aurora Electrical Company of Yellowknife ships wind turbines throughout the country. Mr. Beam, the financial manager, has determined that through the establishment of local collection centres around the country, he can speed up the collection of payments by two days. Furthermore, the cash management department of the company's bank has indicated to him that he can defer payments on his accounts by one day without offending suppliers. The bank has a remote disbursement centre in New Brunswick. a. If Aurora Electrical Company has $2.45 million per day in collections and $1.09 million per day in disbursements, how many dollars will the cash management system free up? (Enter the answer in dollars not in millions.) Freed-up funds $ b. If Aurora Electrical Company can earn 7% percent per annum on freed-up funds, how much income can be generated? (Enter the answer in dollars not in millions.) Interest on freed-up cash c. If the total cost of the system is $420,000 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.
Osborne Shipbuilding Company, located in Baton Rouge, receives large remittances from its customers in New York and California. If the firm deposits these checks in its local bank, two business days are required for the checks toclear and the funds to become usable by the firm. However, if Osborne sends an employee to New York or Californiaand presents the check for payment at the bank upon which it is drawn, the funds are available immediately to thefirm. The firm can earn 8% per annum on short-term investments, and the cost of sending an employee to New Yorkor California to present the check for payment is $500. What is the net benefit to the firm of employing this specialhandling technique for a $5 million check received on Tuesday? (Assume 365 days per year.)
Osborne Shipbuilding Company, located in Baton Rouge, receives large remittances from its customers in New York and California. If the firm deposits these checks in its local bank, two business days are required for the checks to clear and the funds to become usable by the firm. However, if Osborne sends an employee to New York or California and presents the check for payment at the bank upon which it is drawn, the funds are available immediately to the firm. The firm can earn 8% per annum on short-term investments, and the cost of sending an employee to New York or California to present the check for payment is $500. What is the net benefit to the firm of employing this special handling technique for a $5 million check received on Tuesday? (Assume 365 days per year.)
Ralph Taylor, a nationwide department store chain, currently processes all of its credit sales payments at its St. Louis headquarters. The firm is considering the establishment of a lockbox arrangement with a Los Angeles bank to process payments from its customers in 10 western states. With the lockbox system, average mailing time for customers from this region would be reduced from 4 days to 1 day. Check-clearing time would also be reduced from 4 days to 1 day. Annual collections from the western region are $285 million. Establishment of this lockbox system would reduce the compensating balance requirement at the firm's St. Louis bank by $350,000 and reduce annual payment processing costs at the St. Louis office by $75,000. Funds released by the lockbox arrangement can be invested elsewhere in the firm to earn 5% before taxes. The Los Angeles bank has agreed to process Ralph Taylor's customer payments for an annual fee of $185,000. What are the annual net pretax benefits to Ralph…
Currently James Corporation is using a decentralized collection system whereby customers mail their checks to one of the firm’s eight regional locations. Its annual sales are $150 million. Checks are deposited each business day in a local bank and the amount of the deposit is sent to the firm’s concentration bank in Dallas. The average time between deposit in the local bank and the availability of those funds, in Dallas, to Riley is 6 days. James has determined that the use of wire transfers would reduce the float by four days, but the transfer will cost $15.00. If transfers will be made on each of the 250 days that banks are open, should Riley switch to the wire transfer system? Assume that James can earn 6% on the funds released through this more efficient transfer.
Camila Martinez has several credit cards, on which she is carrying a total current balance of $6,500. She is considering transferring this balance to a new card issued by a local bank. The bank advertises that, for a 4 percent fee, she can transfer her balance to a card that charges a 0 percent interest rate on transferred balances for the first 6 months. Calculate the fee that Camila would pay to transfer the balance. $ Describe the benefits and drawbacks of balance transfer cards.
You are managing a company which imports electrical fans from China and sells them in Turkey. You pay cash for the fans when they arrive Turkey. You collect the money of your sales by cash as soon as you sell them. You loan money from the bank for financing this business. Cost of a Fan (Including Transportation and Customs): $19,00 Arrival Time of Fans to Turkey: 15th of February Sales Time of Fans: 15th of May Banks interest rate for loaning (monthly): 2,4% How much you should sell each of the fans for if you want to get 5% profit? (Assume the your only costs are the money you pay the supplier and the interest you pay to the bank)
João, owner of a small clothing store, found that his company's cash needed funds in the form of money so that his employees' salary commitments could be settled. So the alternative he had at the moment was the discount of duplicates at a bank branch. The amount required for the payment of employees is $35,000.00, the amount held in duplicates is $42,000.00 with a maturity of 60 days. The bank is charging a discount rate of 60% per year. Will John be able to pay the employees? What is the annual interest rate charged by the bank?
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lockbox system. She forecasts that 220 payments a day will be made to lockboxes with an average payment size of $3,300. The bank’s charge for operating the lockboxes is $0.58 a check. Assume an interest rate of 8% and a 365-day year. What reduction in the time to collect and process each check is needed to justify use of the lockbox system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $12 million in withdrawals from other banks’ ATM machines. On average, noncustomers earn a wage of $26 per hour and pay ATM fees of $3.50 per transaction. It is estimated that banks would be willing to maintain services for 4 million transactions at $1.50 per transaction, while noncustomers would attempt to conduct 19 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash. Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.50 cap on the fees banks can charge for noncustomer transactions? Instructions: Enter your responses rounded to the nearest penny (two decimal places)

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