EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 17, Problem 3P
a.
Summary Introduction
To determine: The amount of funds released.
a.
Expert Solution
Answer to Problem 3P
The amount of funds released is $2,465,753.42.
Explanation of Solution
Determine the reduction in collection time
Therefore, the reduction in collection time is 5 days.
Determine the average daily collection
Therefore, the average daily collection is $493,150.68.
Determine the amount of funds released
Therefore, the amount of funds released is $2,465,753.42.
b.
Summary Introduction
To determine: The annual earnings on the released funds.
b.
Expert Solution
Answer to Problem 3P
The annual earnings on the released funds is $2,465,753.42.
Explanation of Solution
Determine the annual earnings on the released funds
Therefore, the annual earnings on the released funds is $246,575.34.
c.
Summary Introduction
To determine: The annual fee.
c.
Expert Solution
Answer to Problem 3P
The annual fee is $315,000.
Explanation of Solution
Determine the annual fee
Therefore, the annual fee is $315,000.
d.
Summary Introduction
To determine: The annual net benefits.
d.
Expert Solution
Answer to Problem 3P
The annual net benefits are -$18,424.66.
Explanation of Solution
Determine the annual net benefits
Therefore, the annual net benefits are -$18,424.66.
e.
Summary Introduction
To determine: The annual net benefits.
e.
Expert Solution
Answer to Problem 3P
The annual net benefits are $121,917.95.
Explanation of Solution
Determine the amount of funds released
Therefore, the amount of funds released is $2,465,753.42.
Determine the annual net benefits
Therefore, the annual net benefits are $121,917.95.
f.
Summary Introduction
To discuss: The lockbox system the firm should select.
f.
Expert Solution
Answer to Problem 3P
The lockbox system the firm should select is SLC bank’s lockbox system.
Explanation of Solution
Since SLC’s bank provides a higher net benefits for the firm, the lockbox system that the firm should select is SLC bank’s lockbox system.
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Students have asked these similar questions
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?
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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
Chapter 17 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
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