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    xsassygirl's Avatar
    xsassygirl Posts: 5, Reputation: 1
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    #1

    Mar 27, 2009, 10:45 AM
    Lockbox cash Management
    A company’s treasurer has been examining the current cash collection policies. On average, each lockbox center handles $130,000 in payments each day. The company’s current policy is to invest these payments in short term marketable securities daily at the collection center banks. Every two weeks the investment accounts are swept, and the proceeds are wire-transferred to headquarters in Dallas to meet payroll. The investment accounts each pay 0.015 percent per day, and the wire transfers cost 0.15 percent of the amount transferred.

    The treasurer has been approached by Third National Bank about the possibility of setting up a concentration banking system for the company. Third National will accept the lockbox centers’ daily payments via automated clearinghouse (ACH) transfers in lieu of wire transfers. The ACH-transferred funds will not be available for use for one day. Once cleared, the funds will be deposited in a short-term account, which will also yield o.015 percent per day. Each ACH transfer will cost $700. The treasurer has been asked to determine which cash management system will be the best for the company. The following questions need to be answered.

    1. What is the total net cash flow from the current lockbox system available to meet payroll?

    2. Under the terms outlined by Third National Bank, should the company proceed with the concentration banking system?

    3. What cost of ACH transfers would make the company indifferent between the two systems?
    aas's Avatar
    aas Posts: 13, Reputation: 1
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    #2

    Apr 15, 2009, 11:34 AM

    Wow, I've got the exact case like this last semester.. but aren't this forum is a discussion forum? So which concept of this case that you need help on?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    Apr 16, 2009, 12:20 AM

    Please see the guidelines for posting homework questions:

    Ask Me Help Desk - Announcements in Forum : Homework Help
    roserousseau's Avatar
    roserousseau Posts: 2, Reputation: 1
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    #4

    Sep 25, 2009, 07:36 PM
    Quote Originally Posted by aas View Post
    wow,, i've got the exact case like this last semester.. but aren't this forum is a discussion forum? so which concept of this case that you need help on?
    I do not understand the question so I really need help in answering it
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #5

    Sep 26, 2009, 05:05 PM

    See post #3.

    Have you made any attempt at the problem? You should post whatever work you have done.
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