Neon Light Company of Kansas City ships lamps and lighting
appliances throughout the country. Ms. Neon has determined that
through the establishment of local collection centers around the
country, she can speed up the collection of payments by two days.
Furthermore, the cash management department of her bank has
indicated to her that she can defer her payments on her accounts by
one-half day without affecting suppliers. The bank has a remote
disbursement center in Florida.
a. If Neon Light Company has $2.55 million per day
in collections and $1.11 million per day in disbursements, how many
dollars will the cash management system free up? (Enter
your answer in dollars not in millions (e.g., $1,234,567).)
b. If Neon Light Company can earn 7 percent per
annum on freed-up funds, how much will the income be?
(Enter your answer in dollars not in millions (e.g.,
$1,234,567).)
c. If the total cost of the new system is
$430,000, should it be implemented?
No | |
Yes |
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