11) National Auto Loan has customers throughout the 48 contiguous states. Its current policy is to have all customers mail their payments to National Auto's corporate office located in Lansing, Michigan. It is considering a regional lock-box system to collect loan payments from its customers. Changing to a regional lock-box system will decrease the company's float time from six days (on average) to three days. The company's average daily collection is $1,750,000. The bank that operates the regional lock-box system requires compensating balances totaling $800,000. Annual fees and expenses associated with the lock-box system are $350,000.
What is the dollar amount saved if National auto uses the lock-box system?
a. Compute the dollar amount of net funds freed if National Auto uses the lock-box system.
a] | Cash freed = (6-3)*1750000 = | $5,250,000 |
Dollar amount of net funds freed = 5250000-800000 = | $4,450,000 |
11) National Auto Loan has customers throughout the 48 contiguous states. Its current policy is to...
11) National Auto Loan has customers throughout the 48 contiguous states. Its current policy is to have all customers mail their payments to National Auto's corporate office located in Lansing, Michigan. It is considering a regional lock-box system to collect loan payments from its customers. Changing to a regional lock-box system will decrease the company's float time from six days (on average) to three days. The company's average daily collection is $1,750,000. The bank that operates the regional lock-box system...
Float Simon Corporation has daily cash receipts of $65,000. A recent analysis of its collections indicated that customers' payments were in the mail an average of 2.5 days. Once received, the payments are processed in 2.5 days. After payments are deposited, it takes an average of 2 days for these receipts to clear the banking system. a. How much collection float (in days) does the firm currently have? b. If the firm's opportunity cost is 11%, would it be economically...
P14-14 (similar to) Question Help Float Simon Corporation has daily cash receipts of $57,000. A recent analysis of its collections indicated that customers' payments were in the mail an average of 3 days. Once received, the payments are processed in 3 days. After payments are deposited, it takes an average of 3 days for these receipts to clear the banking system. a. How much collection float (in days) does the firm currently have? b. If the firm's opportunity cost is...
1. What is Webb
Corporation’s total net cash flow available from the current
lockbox system to meet payroll?
2. Under the terms outlined by Third National Bank,
should the company proceed with the concentration banking
system?
3. What cost of ACH transfers would make the company
indifferent between the two systems?
yielding 4 percent per year, and there are 365 days per year. MINICASE Cash Management at Webb Corporation Webb Corporation was founded 20 years ago by its president, Bryan...