# Question: A mail order firm processes 5 300 checks per month Of these

A mail-order firm processes 5,300 checks per month. Of these, 60 percent are for $43 and 40 percent are for $75. The $43 checks are delayed two days on average; the $75 checks are delayed three days on average. Assume 30 days in a month.

a. What is the average daily collection float? How do you interpret your answer?

b. What is the weighted average delay? Use the result to calculate the average daily float.

c. How much should the firm be willing to pay to eliminate the float?

d. If the interest rate is 7 percent per year, calculate the daily cost of the float.

e. How much should the firm be willing to pay to reduce the weighted average float to 1.5 days?

a. What is the average daily collection float? How do you interpret your answer?

b. What is the weighted average delay? Use the result to calculate the average daily float.

c. How much should the firm be willing to pay to eliminate the float?

d. If the interest rate is 7 percent per year, calculate the daily cost of the float.

e. How much should the firm be willing to pay to reduce the weighted average float to 1.5 days?

**View Solution:**## Answer to relevant Questions

Billy’s Exterminators, Inc., has sales of $734,000, costs of $315,000, depreciation expense of $48,000, interest expense of $35,000, and a tax rate of 35 percent. What is the net income for this firm?Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following: Average number of payments per day..... 385Average value of payment........... ...The All Day Company is currently holding $690,000 in cash. It projects that over the next year its cash outflows will exceed cash inflows by $140,000 per month. How much of the current cash holdings should be retained, and ...A firm offers terms of 1y10, net 30. What effective annual interest rate does the firm earn when a customer does not take the discount? Without doing any calculations, explain what will happen to this effective rate if:a. ...Solar Engines manufactures solar engines for tractor-trailers. Given the fuel savings available, new orders for 125 units have been made by customers requesting credit. The variable cost is $11,400 per unit, and the credit ...Post your question