(Marketable-securities portfolio) The Alex Daniel Shoe Manufacturing Company currently pays its employees on a weekly basis. The weekly wage bill is $400,000. This means that on average the firm has accrued wages payable of ($400,000+$0)/2=$200,000.

Alex Daniel Jr. works as thefirm's senior financial analyst and reports directly to hisfather, who owns all of thefirm's common stock. Alex Daniel Jr. wants to move to a monthlywage-payment system. Employees would be paid at the end of every fourth week. The younger Daniel is fully aware that the labor union representing thecompany's workers will not permit the monthly payments system to take effect unless the workers are given some type of fringe benefit compensation. A plan has been worked out whereby the firm will make a contribution to the cost of life insurance coverage for each employee. This will cost the firm $50,000 annually. Alex Daniel Jr. expects the firm to earn 8 percent annually on itsmarketable-securities portfolio.

1. What would the net cost or savings be from operating the monthly paymentsystem?

$ (Round to the nearestdollar.)

Based on the projectedinformation, should Daniel Shoe Manufacturing move to the monthlywage-payment system?(Select the best choicebelow.)

A.

No.DanielShoeshouldnotmovetothemonthlypaymentsystemsinceitwillgeneratenetannualloss.

B.

Yes.DanielShoeshouldmovetothemonthlypaymentsystemsinceitwillgeneratenetannualsavings.

2. What annual rate of return on themarketable-securities portfolio would enable the firm to just break even on thisproposal?

% (Round to two decimalplaces.)