City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursementsfrom remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by twoand one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are beinginvested in short-term instruments yielding 5 percent per annum.a. If City Farm has $4.30 million per day in collections and $3.30 million per day in disbursements, how many dollars has the cashmanagement system freed up?Note: Enter your answer in dollars not in millions (e.g., $1,234,567).Freed-up fundsb. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash?Note: Enter your answer in dollars not in millions (e.g., $1,234,567).Interest on freed-up cash

The average collection period is the amount of time it takes for a business to receive payments owed…

Answered: City Farm Insurance has collection…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If City Farm has $4.30 million per day in collections and $3.50 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions (e.g., $1,234,567).) 1 Freed-up funds $ b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Interest on freed-up cash $ 275,000
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. If City Farm has $4.90 million per day in collections and $3.90 million per day in disbursements, how many dollars has the cash management system freed up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? Note: Enter your answer in dollars not in millions (e.g., $1,234,567).
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 4 percent per annum.a. If City Farm has $4.60 million per day in collections and $3.60 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Freed up funds?___________ b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? Interest on freed-up cash__________
Sheila's Society Clothing Manufacturer has collection centres around the country to speed up cash collections. The company also makes its disbursements from remote disbursement centres, so cheques written by Sheila's take longer to clear the bank. Collection time has been reduced by three days and disbursement time has been increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If the firm has $4.20 million per day in collections and $3.20 million per day in disbursements, how many dollars has the cash management system freed up? (Enter the answer in dollars not in millions.) Freed-up funds b. How much can Sheila's earn per year on short-term investments made possible by the freed-up cash? (Enter the answer in dollars not in millions.) Interest on freed-up cash $
A. How much is the average daily collections? B. How much is the increase in the average cash balance due to the three-day reduction in the collection float if the new system is adopted? C. How much is the gross benefit (annual return on the investment of increase in the average cash balance) of the lockbox system?
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A firm has steady inflows and periodic outflows and wants to use the Beranek model to manage its cash. Cash outflows occur once per month; the amount of the next outflow is $2.16 million. It costs $200 to make an investment or a disinvestment. The yearly interest rate is 8 percent. Calculate: a. The optimal number of transactions. b. The amount of the periodic investments. c. The amount of the final withdrawal. d. The net profit from this strategy.
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. If 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, what is the optimal cash amount C* to transfer from marketable securities to the checking account according to the Baumol Model?
To meet any shortfall in the previous question, NewBank will borrow the cash in the fed funds market. Management decides to borrow the needed funds for the remainder of the month (now 29 days). The required yield on a discount basis is 2.9%. What does the balance sheet look like after this transaction?
A company estimates that it will need $52,000 in 18 years to replace a computer. If it establishes a sinking fund by making fixed monthly payments into an account paying 6.3% compounded monthly, how much should each payment be? FORES: O OF Save A company estimates that it will need $52,000 in 18 years to replace a computer. If it establishes a sinking fund by making fixed monthly payments into an account paying 6.3% compounded monthly, how much should each payment be?
Jim Hayes wants to buy some electronic equipment for $800. Jim has decided to save uniformamount at the end of each month so that after 12 months he will have the required $800. If theinterest rate is 0.5% per month (a) Construct a cash flow diagram (b) determine how much Jim has to deposit each month by using tabulated factors
Pace Electronics sells a diagnostic machine to a hospital with a four-year payment plan. The company would like to estimate the bad debt allowance needed to cover the notes outstanding over the next four years. Estimated lost cash flows and the probability of occurrence for each of the next four years are summarized in the following schedule. The risk-free rate is 3% . Begin by computing the estimated cash flow loss each year. (Enter all amounts as positive amounts.) Projected Cash Flow Expected Loss from Uncollected Probability of Cash Flow Year Notes Loss Occurring Loss 2023 $9,000 65 % 20,000 35 % Total expected cash flow loss in 2023 2024 $15,000 20 % 26,000 45 % 65,000 35 % Total expected cash flow loss in 2024 2025 $5,000 85 % 19,000 15 % Total expected cash flow loss in 2025…

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