Problems in Current Asset Management and Short Term Financing 1 I a Borey. Incorporated has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers the collection time has been reduced by two days and disbursement time increased by one day because of these policies. Excess funds are being invested in short-term instruments yielding 12 percent per annum If Borex has $5 million per day in collections and $3 million per day in disbursements, how many dollars has the cash management system freed up? How much can Borgy eam in dollars per year on short-term investments made possible by the freed-up cash? Compute the cost of not taking the following cash discounts. 2/10, net 40 2/15, net 30 2/10, net 45. d. 3/10, net 90. D. a C Use this formula Cost of not Discount 360 taking a cash discount 100%-Disc% Final due date Discount period 3 Tenorio Company can borrow from its bank at 13 percent to take a cash discount The terms of the cash discount are 2/15. net 55. Should the firm borrow the funds? ABC bank will lend you $4,000 for 45 days at a cost of $50 interest What is your effective Tate of interest? Use this formula Effective rate= (interest/principal) 1 (Days in a year (360) / days loan is outstanding) 4 5. John Marshal borrows $5,000 for one year at 13 percent interest What is the effective rate of interest if the loan is discounted? Effective rate = (interest/principal interest) x (Days in a year (360) / On a discounted loan days loan is outstanding)