Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 7, Problem 1P
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers so the firm’s checks will take longer to clear the bank. Collection time has been reduced by two days and disbursement time increased by one day because of these policies. Excess funds are being invested in short-term instruments yielding 12 percent per annum.
a. If City Farm has
b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash?
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City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements
from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two
and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being
invested in short-term instruments yielding 5 percent per annum.
a. If City Farm has $4.30 million per day in collections and $3.30 million per day in disbursements, how many dollars has the cash
management system freed up?
Note: Enter your answer in dollars not in millions (e.g., $1,234,567).
Freed-up funds
b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash?
Note: Enter your answer in dollars not in millions (e.g., $1,234,567).
Interest on freed-up cash
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements
from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by two
and one-half days and disbursement time increased by one and one-half days because of these policies. Excess funds are being
invested in short-term instruments yielding 5 percent per annum.
a. If City Farm has $4.30 million per day in collections and $3.50 million per day in disbursements, how many dollars has the cash
management system freed up? (Enter your answer in dollars not in millions (e.g., $1,234,567).)
1
Freed-up funds
$
b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash? (Enter your
answer in dollars not in millions (e.g., $1,234,567).)
Interest on freed-up cash $
275,000
City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by three days and disbursement time increased by two days because of these policies. Excess funds are being invested in short-term instruments yielding 4 percent per annum.a. If City Farm has $4.60 million per day in collections and $3.60 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions (e.g., $1,234,567).)
Freed up funds?___________
b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash?
Interest on freed-up cash__________
Chapter 7 Solutions
Foundations of Financial Management
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Why would a financial manager want to slow down...Ch. 7 - Use The Wall Street Journal or some other...Ch. 7 - Why are Treasury bills a favorite place for...Ch. 7 - Explain why the bad debt percentage or any other...Ch. 7 - What are three quantitative measures that can be...Ch. 7 - Prob. 8DQCh. 7 - What does the EOQ formula tell us? What assumption...Ch. 7 - Why might a firm keep a safety stock? What effect...
Ch. 7 - If a firm uses a just-in-time inventory system,...Ch. 7 - City Farm Insurance has collection centers across...Ch. 7 - Prob. 2PCh. 7 - Orbital Communications has operating plants in...Ch. 7 - Postal Express has outlets throughout the world....Ch. 7 - Thompson Wood Products has credit sales of...Ch. 7 - Oral Roberts Dental Supplies has annual sales of...Ch. 7 - Knight Roundtable Co. has annual credit sales of...Ch. 7 - Darla’s Cosmetics has annual credit sales of...Ch. 7 - Barney’s Antique Shop has annual credit sales of...Ch. 7 - Mervyn’s Fine Fashions has an average collection...Ch. 7 - Route Canal Shipping Company has the following...Ch. 7 - Nowlin Pipe & Steel has projected sales of 72,000...Ch. 7 - Fisk Corporation is trying to improve its...Ch. 7 - Prob. 14PCh. 7 - Diagnostic Supplies has expected sales of 84,100...Ch. 7 - Wisconsin Snowmobile Corp. is considering a switch...Ch. 7 - Johnson Electronics is considering extending trade...Ch. 7 - Henderson Office Supply is considering a more...Ch. 7 - Fast Turnstiles Co. is evaluating the extension of...Ch. 7 - Slow Roll Drum Co. is evaluating the extension of...Ch. 7 - Global Services is considering a promotional...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...
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