BC Corporation receives checks from its customers. The total check value averages 700,000 each day. It takes an average of 5 days from deposits for these to clear the bank. If the bank offers to accelerate the 5-day clearing process to 3 days for a monthly fee of 600. If ABC can earn 4% investment income from excess cash, how much is the net annual benefits/cost of this bank offer?

Q: a. Paradise Retailers, Inc. (PRI) determined that $1,500,000 is needed for cash transactions made…

A: Total cash needed (T) = $1,500,000Fixed charges (F) = $12.95Interest rate (I) = 4.5%

Q: You wish to save $30,000 by making $1000 deposits at the end of each month. If the bank pays 4%…

A: Dear student, we need to use NPER and FV formulas in excel to solved this problem.

Q: Sherman’s Sherbet currently takes about 6 days to collect and deposit checks from customers. A…

A: Collection average = $15,000 Days of collection = 6 Reduced time = 3 Interest rate = 0.02%

Q: First City Bank pays 5 percent simple interest on its savings account balances, whereas Second City…

A: simple interest formula: A=p×1+rtwhere,A=amountP=principalr=ratet=time in years compound interest…

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A: Net present value (NPV) is a financial metric used to assess the profitability of an investment. It…

Q: Community Financial provides lockbox services. They estimate that your firm can reduce its average…

A:

Q: You currently have $5,300. First United Bank will pay you an annual interest rate of 8.8, while…

A: As per the given information: Future value - $13,000 Present value - $5,300 Rate of interest - 8.8…

Q: The left bank is offering CDs at 5%. The right bank is offering a money market account at 4%. If I…

A: Fill in below with the information to set up the system of equations:  State your answer in complete…

Q: Yoo Incorporated, has arranged a line of credit that allows it to borrow up to $63 million at any…

A: We need to use compound interest formula below to calculate interest Compound interest = P[(1+i)n…

Q: You can earn .44 percent per month at your bank  if you deposit $2700 how long must you wait until…

A: We can solve the question using the concept of time value of money. According to the concept of time…

Q: Dome Metals has credit sales of $468,000 yearly with credit terms of net 60 days, which is also the…

A: Firm often make strategies to collect account receivables outstanding balance at an early point of…

Q: Knob, Inc., is a nationwide distributor of furniture hardware. The company now uses a central…

A: As per the given information: Credit sales - $198.00 million Flat fee of First National - $150,000…

Q: Bank A pays 7% simple interest on its savings account balances. Bank B pays 5.5% interest compounded…

A: STEP 1 Simple interest is the amount of interest charged on a specific principal amount at a…

Q: It takes Cookie Cutter Modular Homes, Incorporated, about six days to receive and deposit checks…

A: Number of days it takes to recieve and deposit checks - 6 Number of days it is expected to be…

Q: Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box…

A: A lockbox system is used when a company has high collection float  and the funds are locked up. The…

Q: Subject : - Finanace  assume you currently have a chase sapphire preferred card with a balance of…

A: Present value is the estimation of the current value of future cash value which is likely to be…

Q: Wells Fargo Bank lent a newly graduated engineer $1,000 at i = 5 % per year for 4 years to buy home…

A: Here, Lending Amount is $1,000 Interest Rate is 5% Time Period is 4 years Equivalent Net Cash Flow…

Q: General Products writes checks that average $33,000 daily. These checks take an average of 6 days to…

A: Data given: Average payments received daily = $35,000 Float time = 3 days Float time is the time…

Q: Your firm has an average receipt size of $135. A bank has approached you concerning a lockbox…

A: In this scenario, our objective is to assess whether the lockbox project should be approved,…

Q: Paradise Retailers, Inc. (PRI) determined that $1,500,000 is needed for cash transactions made…

A: Baumol model is the cash management model that helps in managing the excess funds by using optimum…

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.