A parent company settles the collection account balances of its subsidiaries once a week. (That is, each

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A parent company settles the collection account balances of its subsidiaries once a week. (That is, each week it transfers any balances in the accounts to a central account.) The cost of a wire transfer is $10. A check costs $.80. Cash transferred by wire is available the same day, but the parent must wait three days for checks to clear. Cash can be invested at 12 percent per year. How much money must be in a collection account before it pays to use a wire transfer?

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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