Question: Using Weighted Average Delay A mail-order fi rm processes 5,000 checks per month. Of these, 65 percent are for $50 and 35 percent are for

Using Weighted Average Delay A mail-order fi rm processes 5,000 checks per month. Of these, 65 percent are for $50 and 35 percent are for $70. The $50 checks are delayed two days on average; the $70 checks are delayed three days on average.

a. What is the average daily collection fl oat? How do you interpret your answer?

b. What is the weighted average delay? Use the result to calculate the average daily fl oat.

c. How much should the fi rm be willing to pay to eliminate the fl oat?

d. If the interest rate is 7 percent per year, calculate the daily cost of the fl oat.

e. How much should the fi rm be willing to pay to reduce the weighted average fl oat by 1.5 days? LO.1

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