The Saban Corporation is trying to decide whether to switch to a bank that will accommodate electronic
Question:
The Saban Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban’s customers. Saban’s financial manager believes the new system would decrease its collection float by as much as five days. The new bank would require a compensating balance of $25,000, whereas its present bank has no compensating balance requirement. Saban’s average daily collections are $10,200, and it can earn 7.9% on its short-term investments. Should Saban make the switch? (Assume the compensating balance at the new bank will be deposited in a non-interest-earning account.)
Step by Step Answer:
To determine whether Saban should make the switch to the new bank accommodating electronic funds tra...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781292437156
5th Global Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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