Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one- half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon Light Company has $3.10 million per day in collections and $1.22 million per day in disbursements, how many dollars will the cash management system free up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Freed-up funds b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Interest on freed-up cash c. If the total cost of the new system is $485,000, should it be implemented?
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one- half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. a. If Neon Light Company has $3.10 million per day in collections and $1.22 million per day in disbursements, how many dollars will the cash management system free up? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Freed-up funds b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be? Note: Enter your answer in dollars not in millions (e.g., $1,234,567). Interest on freed-up cash c. If the total cost of the new system is $485,000, should it be implemented?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one-half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.
Transcribed Image Text:Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that
through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one-
half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her
accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.
a. If Neon Light Company has $3.10 million per day in collections and $1.22 million per day in disbursements, how many dollars will the
cash management system free up?
Note: Enter your answer in dollars not in millions (e.g., $1,234,567).
Freed-up funds
b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be?
Note: Enter your answer in dollars not in millions (e.g., $1,234,567).
Interest on freed-up cash
c. If the total cost of the new system is $485,000, should it be implemented?
OO
No
Yes
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