No More Books Corporation has an agreement with Floyd Bank whereby the bank hand
ID: 2647758 • Letter: N
Question
No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $3.6 million in collections a day and requires a $280,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $1.8 million of collections a day, and each requires a compensating balance of $130,000. No More Books
No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $3.6 million in collections a day and requires a $280,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $1.8 million of collections a day, and each requires a compensating balance of $130,000. No More Books
Explanation / Answer
Collection to be made daily = 3.6 million
Compensating balance 280000
By dividing the eastern region the collection will remain the same but the compensating balnce will be reduced to 260000
Hence the npv of the system is 280000-260000
=20000
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