8.33 points Purplo Fee Wine, Inc, receives an average of S14,000 in checks per d

Question

8.33 points Purplo Fee Wine, Inc, receives an average of S14,000 in checks per day. The delay in clearing is typically four days. The current interest rate is .018 percent per day a. What is the company's foat? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the most the company should be willing to pay today to eliminate its float entirely? (Do not c. What is the highest daily fee the company should be willing to pay to eliminate its float entirely? (Do not round intermediate calculations and round your answer to 2 decimal places. e.g., 32-16.) Maximum daily charge References eBook & Resources Worksheet

Explanation / Answer

a) The company's float is the average daily value of checks received times the average number of days for the checks to clear .

Companys float = 4*$14,000 = $56,000

B) The company should pay no more than the amount of float or $56,000 to eliminate the float.

C) The maximum daily charge the firm should be willing to pay is the collection float times the daily interest rate .

Maximum daily charge = $56,000 *0.018%

= $10.08

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