TJ Rails is trying to improve their liquidity position and reduce their reliance on short - term
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Question:
TJ Rails is trying to improve their liquidity position and reduce their reliance on shortterm loans. In order to do so they are looking into a lockbox system being offered by their bank.
The lockbox system will speed up collections by days and will cost the company $ If the lockbox system is implemented, however, the bank would require the company to maintain a compensating balance of $ in its account.
In addition to the lockbox system the company would also extend the timing of disbursements by days. The companys daily remittances amount to $ million, and they could earn on the funds freed up
Required:
Advise TJ Rails whether or not they go ahead and put these changes in place? show all calculations
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