Case synopsis: Person B founded corporation W 20 years before. It was started as a mail order company and grew rapidly in recent years. As there is an extensive geographical dispersion of customers of the company, it presently employs a lockbox system with the collection place in City S. Person H, the treasurer of the company, is assessing the present cash collection policies. He identifies the number of payments to be handled by the lockbox service and the company’s present policy is to invest the payments in the short-term marketable securities. Due to this, the proceeds are wire-transferred to the headquarters of the corporation in order to meet payroll. Person H was approached by the third national bank on the possibility of establishing a banking system for Corporation W. Characters in the case: Corporation W Person H Person B Adequate information: The third national bank would accept every lockbox center’s regular payment through ACH (Automated clearinghouse). The transferred funds through ACH would not be available for utilization for a single day. To calculate: The ACH transfer cost at which the company is indifferent between the two systems.

Question

Want to see the full answer?

Answer 1

Question

Chapter 19, Problem 3M

Summary Introduction

Case synopsis:

Person B founded corporation W 20 years before. It was started as a mail order company and grew rapidly in recent years. As there is an extensive geographical dispersion of customers of the company, it presently employs a lockbox system with the collection place in City S.

Person H, the treasurer of the company, is assessing the present cash collection policies. He identifies the number of payments to be handled by the lockbox service and the company’s present policy is to invest the payments in the short-term marketable securities. Due to this, the proceeds are wire-transferred to the headquarters of the corporation in order to meet payroll.

Person H was approached by the third national bank on the possibility of establishing a banking system for Corporation W.

Characters in the case:

Corporation W

Person H

Person B

Adequate information:

The third national bank would accept every lockbox center’s regular payment through ACH (Automated clearinghouse).

The transferred funds through ACH would not be available for utilization for a single day.

To calculate: The ACH transfer cost at which the company is indifferent between the two systems.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Finance pr

What is a problem statement outline? Could you please give seome examples? What are the research questions and methodology? How do they work, please some examples? What is a research framework outline? Please give some examples. What is a Final Research Concept? Please give some example.

Skip Stephens is trying to decide whether it would be wise to consolidate his debt by borrowing funds from Syndicated Lending, a firm that he doesn’t know much about. Syndicated is an Internet lender that doesn’t post much information about the costs of the loans it offers. Some of the additional information Skip has gathered from various sources suggests the Syndicated might use such unethical practices as “bait and switch” to attract customers. Discussion questions: Is there an ethical problem? If so, what is it? What are the implications if Skip borrows from Syndicated? Should Skip borrow from Syndicated?