Suppose the Atherton Fuels Corporation (AFC) currently uses a centralized collection system that has all monthly...

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Suppose the Atherton Fuels Corporation (AFC) currently uses a centralized collection system that has all monthly customer payments remitted to its account at the Twelfth National Bank. For this service, AFC pays a flat monthly service charge of $750. Last week, Natalia Kelly, AFC's treasurer, received the following two offers to process the company's customer payments: Proposal 1: This offer, from Payment Processing Services Inc., proposes to process AFC's monthly payments for a fee of $0.20 per payment and a monthly service charge of $200. Proposal 2: This offer, from First Fidelity Bank, does not impose per-payment fees or monthly service charges; rather, it requires a compensating balance of $100,000 in an account maintained at the bank. AFC receives an average of 55,000 payments per month, and the company earns an average return of 8.00% on am available funds. Help Natalia Kelly complete the following table by calculating the annual cost of each payment-processing proposal: Payment-Processing System-Annual Cost Current system Payment Processing Services Inc.'s system (Proposal 1) First Fidelity Bank's system (Proposal 2) $9,000 $8,000 $9,100 $7,200 Based on calculations for each proposal, which recommendation and justification is best to give to Natalia Kelly? The best plan, that suggested by First Fidelity Bank, is expected to save approximately $1,000 per year compared with the cost of AFC's current system. The best plan has been proposed by Payment Processing Services Inc.; it is expected to save AFC approximately $4,180 per year compared with the cost of its current system. The current system should be retained, because its annual cost is lower than the proposed alternatives. Suppose the Atherton Fuels Corporation (AFC) currently uses a centralized collection system that has all monthly customer payments remitted to its account at the Twelfth National Bank. For this service, AFC pays a flat monthly service charge of $750. Last week, Natalia Kelly, AFC's treasurer, received the following two offers to process the company's customer payments: Proposal 1: This offer, from Payment Processing Services Inc., proposes to process AFC's monthly payments for a fee of $0.20 per payment and a monthly service charge of $200. Proposal 2: This offer, from First Fidelity Bank, does not impose per-payment fees or monthly service charges; rather, it requires a compensating balance of $100,000 in an account maintained at the bank. AFC receives an average of 55,000 payments per month, and the company earns an average return of 8.00% on am available funds. Help Natalia Kelly complete the following table by calculating the annual cost of each payment-processing proposal: Payment-Processing System-Annual Cost Current system Payment Processing Services Inc.'s system (Proposal 1) First Fidelity Bank's system (Proposal 2) $9,000 $8,000 $9,100 $7,200 Based on calculations for each proposal, which recommendation and justification is best to give to Natalia Kelly? The best plan, that suggested by First Fidelity Bank, is expected to save approximately $1,000 per year compared with the cost of AFC's current system. The best plan has been proposed by Payment Processing Services Inc.; it is expected to save AFC approximately $4,180 per year compared with the cost of its current system. The current system should be retained, because its annual cost is lower than the proposed alternatives.

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To determine the annual cost of each paymentprocessing proposal we need to consider the fees and cha... View the full answer