As pointed out earlier in ‘‘Here’s the Real Kicker,’’ Kicker changed banks a couple of years ago because the loan officer at its bank moved out of state. Kicker saw that as an opportunity to take bids for its banking business and to fine-tune the banking services it was using. This problem uses that situation as the underlying scenario but uses three banks: FirstBank, Community Bank, and RegionalOne Bank. A set of representative data was presented to each bank for the purpose of preparing a bid. The data are as follows:

Checking accounts needed: 6

Checks per month:* 2,000

Foreign debits/credits on checking accounts per month: 200

Deposits per month* 300

Returned checks:* 25 per month

Credit card charges per month: 4,000

Wire transfers per month: 100, of which 60 are to foreign bank accounts

Monthly credit needs (line of credit availability and cost): $100,000 average monthly usage

* These are overall totals for the six accounts during a month.

Internet banking services?

Knowledgeable loan officer?

Responsiveness of bank?

FirstBank Bid:

Checking accounts: $5 monthly maintenance fee per account

$0.10 foreign debit/credit

$0.50 earned for each deposit

$3 per returned check

Credit card fees: $0.50 per item

Wire transfers: $15 to domestic bank accounts, $50 to foreign bank accounts

Line of credit: Yes, this amount is available,

Interest charged at prime plus 2 percent,

Subject to a 6 percent minimum interest rate

Internet banking services? Yes, full online banking available:

$15 one-time setup fee for each account,

$20 monthly fee for software module

The loan officer assigned to the potential Kicker account had 10 years of experience with medium to large business banking and showed an understanding of the audio industry.

Community Bank Bid:

Checking accounts: No fees for the accounts, and no credits earned on deposits;

$2.00 per returned check

Credit card fees: $0.50 per item,

$7 per batch processed. Only manual processing was available, and

Kicker estimated 20 batches per month

Wire transfers: $30 per wire transfer

Line of credit: Yes, this amount is available,

Interest charged at prime plus 2 percent,

Subject to a 7 percent minimum interest rate

Internet banking services? Not currently, but within the next six months

The loan officer assigned to the potential Kicker account had four years of experience with medium to large business banking, none of which pertained to the audio industry.

RegionalOne Bank Bid:

Checking accounts: $5 monthly maintenance fee per account to be waived for Kicker

$0.20 foreign debit/credit

$0.30 earned for each deposit

$3.80 per returned check

Credit card fees: $0.50 per item

Wire transfers: $10 to domestic bank accounts, $55 to foreign bank accounts

Line of credit: Yes, this amount is available,

Interest charged at prime plus 2 percent,

Subject to a 6.5 percent minimum interest rate

Internet banking services? Yes, full online banking available,

One-time setup fee for each account waived for Kicker

$20 monthly fee for software module

The loan officer assigned to the potential Kicker account had two years of experience with large business banking. Another branch of the bank had expertise in the audio industry and would be willing to help as needed. This bank was the first one to submit a bid.

Required:

1. Calculate the predicted monthly cost of banking with each bank.

2. Suppose Kicker felt that full online Internet banking was critical. How would that affect your analysis from Requirement 1? How would you incorporate the subjective factors (e.g., experience, access to expertise)?