Company has an agreement with Sure Bank in which the bank handles P 5 million in collections a day and requires a P 200,000 compensating balance. Prosperous is thinking of canceling the agreement and dividing its western region so that two other banks will handle its business instead. Bank A will handle P 2 million a day of collections, requiring a compensating balance of P100,000, and bank B will handle the other P 3 million a day, asking for a compensating balance of P 300,000. Prosperous’s financial manager anticipates that collections will be accelerated by one-fourth day if the western region is divided. The company’s rate of return is 14 percent. How much is the Company's net benefit in implementing the new collection method?
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Company has an agreement with Sure Bank in which the bank handles P 5 million in collections a day and requires a P 200,000 compensating balance. Prosperous is thinking of canceling the agreement and dividing its western region so that two other banks will handle its business instead. Bank A will handle P 2 million a day of collections, requiring a compensating balance of P100,000, and bank B will handle the other P 3 million a day, asking for a compensating balance of P 300,000. Prosperous’s
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