No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles $4.7 million in collections a day and requires a $470,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $2.35 million of collections a day, and each requires a compensating balance of $245,000. No More Books’ financial management expects that collections will be accelerated by one day if the eastern region is divided. a. What is the NPV of accepting the system? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What will be the annual net savings? Assume that the T-bill rate is 2.6 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles $4.7 million in collections a day and requires a $470,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $2.35 million of collections a day, and each requires a compensating balance of $245,000. No More Books’ financial management expects that collections will be accelerated by one day if the eastern region is divided. a. What is the NPV of accepting the system? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What will be the annual net savings? Assume that the T-bill rate is 2.6 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
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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No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles $4.7 million in collections a day and requires a $470,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $2.35 million of collections a day, and each requires a compensating balance of $245,000. No More Books’ |
| a. |
What is the |
| b. | What will be the annual net savings? Assume that the T-bill rate is 2.6 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) |
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