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?
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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?
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- The Polk Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Polk's customers. Polk's financial manager believes the new system would decrease its collection float by as much as 7 days. The new bank would require a compensating balance of $23 000, whereas its present bank has no compensating balance requirement. Saban's average daily collections are $11 000, and it can earn 8% on its short-term investments. Should Polk make the switch? (Assume the compensating balance at the new bank will be deposited in a non-interest-earning account.) As a result of using the electronic funds transfer system, the amount of collection float freed up by the loan is $ (Round to the nearest dollar.)Hussein Al Lawati SAOG has recognized that the organization is facing a liquidity crisis. Accordingly, the accountant of the organization has studied the payment records from the customer and has noticed that the company at present offers its customers 25 days credit. Half the customers by value, pay on time. The other half takes an average of 50 days to pay. In this background you are planning to offer a cash discount of 2.5 per cent to your customers for the payment made within 25 days. The credit controller anticipates that half of the customers who now take an average of 50 days to pay will pay in 25 days. The other half will still take an average of 50 days to pay. It is anticipated that the proposed scheme will reduce bad debts amount by RO. 450,000 a year. Annual sales revenue of RO 45,000,000 is made evenly throughout the year. At present the business has a large overdraft RO. 5,000,000 with its bank at an interest of 7 percent a year. Required: a. Calculate receivables…Hussein Al Lawati SAOG has recognized that the organization is facing a liquidity crisis. Accordingly, the accountant of the organization has studied the payment records from the customer and has noticed that the company at present offers its customers 25 days credit. Half the customers by value, pay on time. The other half takes an average of 50 days to pay. In this background you are planning to offer a cash discount of 2.5 per cent to your customers for the payment made within 25 days. The credit controller anticipates that half of the customers who now take an average of 50 days to pay will pay in 25 days. The other half will still take an average of 50 days to pay. It is anticipated that the proposed scheme will reduce bad debts amount by RO. 450,000 a year. Annual sales revenue of RO 45,000,000 is made evenly throughout the year. At present the business has a large overdraft RO. 5,000,000 with its bank at an interest of 7 percent a year. Required: Calculate receivables…
- Hussein Al Lawati SAOG has recognized that the organization is facing a liquidity crisis. Accordingly, the accountant of the organization has studied the payment records from the customer and has noticed that the company at present offers its customers 25 days credit. Half the customers by value, pay on time. The other half takes an average of 50 days to pay. In this background you are planning to offer a cash discount of 2.5 per cent to your customers for the payment made within 25 days. The credit controller anticipates that half of the customers who now take an average of 50 days to pay will pay in 25 days. The other half will still take an average of 50 days to pay. It is anticipated that the proposed scheme will reduce bad debts amount by RO. 450,000 a year. Annual sales revenue of RO 45,000,000 is made evenly throughout the year. At present the business has a large overdraft RO. 5,000,000 with its bank at an interest of 7 percent a year. Required: How much is the Net cost of…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.)a. Paradise Retailers, Inc. (PRI) determined that $1,500,000 is needed for cash transactions made during the next year. Each time PRI deposits money in its checking account, a charge of $12.95 is assessed to cover clerical costs. PRI can hold marketable securities that yield 4.5%, and then convert these securities to cash at a cost of only the $12.95 deposit charge. Optimal Cash Amount = 29382.53 PRI’s financial managers have not been following the Baumol Model. Instead, they have been transferring cash from marketable securities less frequently, namely, transferring cash every three weeks. What total cash cost including holding costs and transactions costs could PRI save by transferring the optimal cash amount C* rather than this larger transfer amount?
- A firm has daily cash receipts through checks. On average 150 checks are received per day while each check has an average value of P2,500. It takes an average of 3 days for the bank to clear the checks. A bank has offered to decrease the clearing period to one day for a monthly fee of P500. The bank gives an interest rate of 3% per year. 18. How much would the average cash in bank balance increase by if the ABC took the bank’s offer?19. How much would ABC receive as total annual interest on the freed cash?20. How much is the annual cost of the service?21. What is the annual net benefit or (loss) from having this service?Joey Espinoza has $1,000 in cash, he deposits the total amount in Legion Banc. LegionBanc lends the amount it can to Christon properties Inc. This company deposits the total amount in NatBankk. How much can NatBankk lend after this deposit? (The Central Bank has a reserve requirement of 10%.)ABC Corporation has a daily collection of 180,000 from a selected foreign customer group. The bank offered to accelerate the clearing time of these collections from 8 days to 5 days for a quarterly fee of 1,000. ABC can invested freed cash into a mutual fund to earn 5% annually. How much is the net benefit/cost of this bank service?
- Your firm has an average receipt size of $135. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 7, 300 checks per day. The daily interest rate is .016 percent. The bank charges a lockbox fee of $125 per day, a. What is the NPV of accepting the lockbox agreement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 800 payments a day will be made to lock boxes with an average payment size of $3,000. The bank’s charge for operating the lock boxes is $0.50 a check. The interest rate is 0.015% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) b. Is it worthwhile to adopt the system? (Yes/No) c. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Your firm has an average receipt size of $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 5,700 checks per day. The daily interest rate is 0.018 percent. The bank charges a lockbox fee of $115 per day. What is the NPV of accepting the lockbox agreement? (Round your answer to 2 decimal places. (e.g., 32.16)) NPV $ What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Net annual savings $.