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Nicholas Birdcage Company of Hollywood ships cages throughout the country. Nicholas has determined that through the establishment of local collection centers around the country, he can speed up the collection of payments by one and one-half days. Furthermore, the cash management department of his bank has indicated to his that he can defer his account by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.
a) If the company has $4-million per day in collections and $2-million per day in disbursements, how many dollars will cash management system free up? b) If the company can earn 9% per annum on freed-up funds, how much will the income be? c) If the annual cost of the new system is $700,000, should it be implemented? |
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