Problem 7-3 Aurora Electrical Company of Yellowknife ships that through the establishment of local collectic days. Furthermore, the cash management depe accounts by one day without offending supplie
Problem 7-3 Aurora Electrical Company of Yellowknife ships that through the establishment of local collectic days. Furthermore, the cash management depe accounts by one day without offending supplie
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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Transcribed Image Text:Problem 7-3
Aurora Electrical Company of Yellowknife ships wind turbines throughout the country. Mr. Beam, the financial manager, has determined
that through the establishment of local collection centres around the country, he can speed up the collection of payments by three
days. Furthermore, the cash management department of the company's bank has indicated to him that he can defer payments on his
accounts by one day without offending suppliers. The bank has a remote disbursement centre in New Brunswick.
a. If Aurora Electrical Company has $215 million per day in collections and $1.03 million per day in disbursements, how many dollars
will the cash management system free up? (Enter the answer in dollars not in millions.)
Freed-up funds
b. If Aurora Electrical Company can earn 6% percent per annum on freed-up funds, how much income can be generated? (Enter the
answer in dollars not in millions.)
Interest on freed-up cash
c. If the total cost of the system is $390,000 should it be implemented?
O Yes
O No
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