Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Question
Chapter 17, Problem 1SP
a)
Summary Introduction
To determine: The reduction in check collection time required for company P not either better or worse for adopted lockbox system.
b)
Summary Introduction
To determine: The change in part a) when the company invest at 4% annual return.
c)
Summary Introduction
To discuss: The difference among part a) and part b).
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One objective of managing a firm's cash is to process its cash receipts as quickly as possible. Banks provide many services to process incoming payments quickly and efficiently. Consider the case of Sandberg Industries: Sandberg Industries owns an office building that it fents to Graham Company. Sandberg Industries and Graham have an agreement in which Graham's bank transfers the monthly rent automatically to Sandberg Industries' account. Which cash management technique is Sandberg using?
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A preauthorized check
A lockbox arrangement
The financial manager of JAC Cosmetics is considering opening a lockbox in Pittsburgh. Checks cleared through the lockbox will
amount to $26,000 per day. The lockbox will make cash available to the company three days earlier than is currently the case.
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Additional available cash
a-2. Is the lockbox worthwhile?
Yes
O No
b. Suppose that the bank offers to run the lockbox for a fee of $0.26 per check cleared instead of a compensating balance. Assume an
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your answer to the nearest whole number.)
Average check size
Assume you are auditing cash payments for Beximco Pharma. Beximco Pharma deals with several very large suppliers who expect payment by electronic funds transfer within three business days of delivery. Other large suppliers will accept cheques or electronic funds transfer on terms of 14 days, and small suppliers receive cheques with payment terms of 30 days. Other regular large cash payments include wages (weekly by electronic funds transfer from a wages account), utilities (electricity accounts are paid monthly by cheque), cleaning (paid monthly by cheque) and rent (paid monthly by electronic funds transfer). In addition, there are irregular payments for items such as maintenance, fixtures purchase and lease, and vehicle running costs. All cash payments are processed in the central office after the required set of documents has been assembled and checked by two junior accounts staff. Payments are authorised by a senior accountant and electronic funds transfer authorities and cheques…
Chapter 17 Solutions
Foundations Of Finance
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - What are the two major objectives of the firms...Ch. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
Ch. 17 - Prob. 11RQCh. 17 - Prob. 1SPCh. 17 - Prob. 2SPCh. 17 - Prob. 3SPCh. 17 - (Interest rate risk) Two years ago your corporate...Ch. 17 - Prob. 6SPCh. 17 - Prob. 7SPCh. 17 - Prob. 8SPCh. 17 - Prob. 9SPCh. 17 - Prob. 10SPCh. 17 - Prob. 11SPCh. 17 - Prob. 1MCCh. 17 - Prob. 2MCCh. 17 - Prob. 3MCCh. 17 - Prob. 4MC
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