No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles $5.2 million in collections a day and requires a $520,000 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 $2.6 million of collections a day, and each requires a compensating balance of $275,000. No More Books' financial management expects that collections will be accelerated by one day if the eastern region is divided. a. What is the NPV of accepting the system? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What will be the annual net savings? Assume that the T-bill rate is 2.5 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) × Answer is complete but not entirely correct. a. NPV $ 5,140,000 b. Annual net savings $ 133,640 x
No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles $5.2 million in collections a day and requires a $520,000 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 $2.6 million of collections a day, and each requires a compensating balance of $275,000. No More Books' financial management expects that collections will be accelerated by one day if the eastern region is divided. a. What is the NPV of accepting the system? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What will be the annual net savings? Assume that the T-bill rate is 2.5 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) × Answer is complete but not entirely correct. a. NPV $ 5,140,000 b. Annual net savings $ 133,640 x
Chapter17: The Management Of Cash And Marketable Securities
Section: Chapter Questions
Problem 2P
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT