What is a lockbox system? How does it typically work? Briefly describe the economics involved in performing a cost-benefit analysis of such a system.
Answer to relevant QuestionsBriefly describe each of the following funds transfer mechanisms: • Automated clearinghouse (ACH) debit transfer • Wire transfer Why are wire transfers typically used only for high-dollar transfers? Briefly describe each of the three basic motives for a firm holding cash and short-term investments. For each of the motives indicate the general form in which the funds are typically held. Firm A has annual revenues of $1.6 billion and can reduce its float by four days using a lockbox system. Due to A’s significant risk, A has a high cost of capital of 22%. Firm B has annual revenues of $850 million and can ...Matthews Manufacturing is negotiating a one-year credit line with its bank, Worldwide Bank. The amount of the credit line is $6.5 million with an interest rate set at 1.5% above the prime rate. A commitment fee of 0.50% (50 ...Suppose that the dollar trades at a forward discount relative to the yen. A U.S. firm must pay a Japanese supplier ¥10 million in three months. A manager in the U.S. firm reasons that because the dollar buys fewer yen on ...
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