CASE 4 (20 points)

Consider the following situations:

1. Each business day, on average, a company writes checks totaling 65,000 to pay its suppliers. The usual clearing time for these checks is 2.4 days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling 93,000. The cash from the payments is available after 1.7 days. Calculate the companys disbursement float, collection float, and net float. (5 points)

2. A company spends 300,000 a month to pay bills and maintains a lower cash balance limit of 50,000. The applicable interest rate is 5.28 percent and the fixed cost of transferring funds is 43. What is the optimal initial cash balance based on the BAT model? (5 points)

3. A company plans to borrow 500,000 for 180 days. It was agreed with the bank that the interest for all the period of the loan will be 30,000. Calculate the effective interest rate. (5 points)

4. A company is being offered credit terms 5/20, net 60 from its supplier. In order to take the discount, the firm will have to borrow the funds from the bank and pay interest at 14 percent. Should it proceed with the discount? (5 points)