Question: Your firm currently processes checks with a decentralized company processing center. Collection float with this collection system is six days. For the decentralized company processing

 Your firm currently processes checks with a decentralized company processing center.

Your firm currently processes checks with a decentralized company processing center. Collection float with this collection system is six days. For the decentralized company processing center, variable processing costs per check and annual fixed costs a re $0.50 and $30,000, respectively. Alter natively, your firm could switch to a central ized processing center that would lower collection float to five days. With this system, variable processing costs per check and annual fixed costs would be $0.30 and $40,000, respectively. Your firm processes 300,000 checks each year with an average face value of $250 per check. The firm has a line of credit with a large outstanding balance priced at an interest rate of 4 percent. Based on th is information, which collection system would maximize firm value? Your firm currently processes checks with a decentralized company processing center. Collection float with this collection system is six days. For the decentralized company processing center, variable processing costs per check and annual fixed costs a re $0.50 and $30,000, respectively. Alter natively, your firm could switch to a central ized processing center that would lower collection float to five days. With this system, variable processing costs per check and annual fixed costs would be $0.30 and $40,000, respectively. Your firm processes 300,000 checks each year with an average face value of $250 per check. The firm has a line of credit with a large outstanding balance priced at an interest rate of 4 percent. Based on th is information, which collection system would maximize firm value

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