The Saban Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban's customers. Saban's financial manager believes the new system would decrease its collection float by as much as 6 days. The new bank would require a compensating balance of $23,000, whereas its present bank has no compensating balance requirement. Saban's average daily collections are $10,200, and it can earn 8.6% on its short-term investments. Should Saban make the switch? (Assume the compensating balance at the new bank will be deposited in a non-interest-earning account.)
The Saban Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban's customers. Saban's financial manager believes the new system would decrease its collection float by as much as 6 days. The new bank would require a compensating balance of $23,000, whereas its present bank has no compensating balance requirement. Saban's average daily collections are $10,200, and it can earn 8.6% on its short-term investments. Should Saban make the switch? (Assume the compensating balance at the new bank will be deposited in a non-interest-earning account.)
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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The Saban Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban's customers. Saban's
6
days. The new bank would require a compensating balance of
$23,000,
whereas its present bank has no compensating balance requirement. Saban's average daily collections are
$10,200,
and it can earn
8.6%
on its short-term investments. Should Saban make the switch? (Assume the compensating balance at the new bank will be deposited in a non-interest-earning account.)
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