It takes Transocean about 8 days to receive and deposit cheques from customers. Transocean’s management is considering a new system to reduce the firm’s collection times. It is expected that the new system will reduce receipt and deposit times to 4 days total. Average daily collections are SFr640,000, and the required rate of return is 12 per cent per year.

(a) What is the reduction in outstanding cash balances as a result of implementing the new system?

(b) What monetary return could be earned on these savings?

(c) What is the maximum monthly charge Transocean should pay for this new system?