analysis of ts average of 2.0 15-14 Float Simon Corporation has daily cash recei
ID: 2802022 • Letter: A
Question
analysis of ts average of 2.0 15-14 Float Simon Corporation has daily cash receipts of $65,000. A recent a collections indicated that customers' payments were in the mail an av days. Once received, the payments are processed in 2.0 days. After paym posited, it takes an average of 2.5 days for these receipts to clear the a. How much collection float (in days) does the firm currently have? b. If the firm's opportunity cost is 9%, would it be economically advisable for the ents an banking system firm to pay an annual fee of $16,500 to reduce collection float by 3 days? Ex plain why or why not.Explanation / Answer
a) Collection float = 2 + 2 +2.5 = 6.5 days
b)
Savings on reducing collection float by 3 days
= 65000 * 365* 9%*3/365 = $ 17550
Since annual fee of $ 16500 is less than saving it is worth economically to reduce collection period.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.