A mail-order firm processes 50,000 cheques per month. Of these, 34 percent are for 20 and 66
Question:
A mail-order firm processes 50,000 cheques per month. Of these, 34 percent are for €20 and 66 percent are for €30. The €20 cheques are delayed 2 days on average; the €30 cheques are delayed 3 days on average. Assume 30 days in a month, on average.
(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 3 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 by 1.5 days?
Principles of Taxation for Business and Investment Planning 2016 Edition
ISBN: 9781259549250
19th edition
Authors: Sally Jones, Shelley Rhoades Catanach