Neon Light Company of Kansas City ships lamps and lighting appliances throughout

Question

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 and one-half 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.

If Neon Light Company has $3.10 million per day in collections and $1.22 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).)

If Neon Light Company can earn 6 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).)

If the total cost of the new system is $485,000, should it be implemented?

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 and one-half 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.

Explanation / Answer

Neon Light Company of Kansas City

a. $3100,000 daily collections × 2.5 days speed up = $7750000

additional collections $1,220,000 daily disbursements × .5 days slow down = $610000

delayed disbursements $8360000 freed-up funds

B- If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be?(Enter your answer in dollars not in millions

8360000*6% = 501600

If the total cost of the new system is $485,000, should it be implemented?

YES BECAUSE COST OF 485000 IS LESS THAN INCOME OF 501600

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.