The daily cash inflows of a company amount to $ 65,000.00. A recent analysis of their collections revealed that it took 21/2 days for customer payments to arrive by mail. Once received, the company required 11/2 days to process them, and three days after they were deposited they appeared in the bank balances. a) What is the delay (in days) that the company normally experiences in the collection of its accounts? b) If the opportunity cost of the company is 11%, is it advisable for the company to pay an annual fee of $ 16,500.00 in order to reduce the delay in the collection of accounts by 3 days? Explain your answer.

The daily cash inflows of a company amount to $ 65,000.00. A recent analysis of their collections revealed that it took 21/2 days for customer payments to arrive by mail. Once received, the company required 11/2 days to process them, and three days after they were deposited they appeared in the bank balances. a) What is the delay (in days) that the company normally experiences in the collection of its accounts? b) If the opportunity cost of the company is 11%, is it advisable for the company to pay an annual fee of $ 16,500.00 in order to reduce the delay in the collection of accounts by 3 days? Explain your answer.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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