It takes Transocean about 8 days to receive and deposit cheques from customers. Transoceans management is considering
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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?
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Related Book For
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe
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