REQUIRED: a. How much is the average daily collection float? b. If cash can be readily invested in instruments earning 5%, how much is the daily cost of the float? c. If STATE FARM can reduce the processing time of its checks by a day, and deposit it immediately, how much can it save in a year?
REQUIRED: a. How much is the average daily collection float? b. If cash can be readily invested in instruments earning 5%, how much is the daily cost of the float? c. If STATE FARM can reduce the processing time of its checks by a day, and deposit it immediately, how much can it save in a year?
Chapter17: The Management Of Cash And Marketable Securities
Section: Chapter Questions
Problem 12P
Related questions
Question
Please answer all subparts.please make an attempt.Thanks in advance
![STATE FARM Company supplies components to auto repair shops. These shops send their checks via remittance firms.
On the average, STATE FARM receives the checks 2 days after the shops mail them, it processes the checks for 2 days,
and then subsequent deposited to its local bank, where it will clear after 24 hours. The average daily collections: P40,000.
REQUIRED:
a. How much is the average daily collection float?
b. If cash can be readily invested in instruments earning 5%, how much is the daily cost of the float?
c. If STATE FARM can reduce the processing time of its checks by a day, and deposit it immediately, how much can it
save in a year?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F436b73a6-b5e7-4d6b-944b-e49b3cc87b71%2Ffc8cdc19-3030-4f5a-b2f9-bf8fab454bef%2F29oyc75_processed.jpeg&w=3840&q=75)
Transcribed Image Text:STATE FARM Company supplies components to auto repair shops. These shops send their checks via remittance firms.
On the average, STATE FARM receives the checks 2 days after the shops mail them, it processes the checks for 2 days,
and then subsequent deposited to its local bank, where it will clear after 24 hours. The average daily collections: P40,000.
REQUIRED:
a. How much is the average daily collection float?
b. If cash can be readily invested in instruments earning 5%, how much is the daily cost of the float?
c. If STATE FARM can reduce the processing time of its checks by a day, and deposit it immediately, how much can it
save in a year?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT