6. 6. Using weighted average delay [LO 19.1] A mail-order firm processes 5 300 cheques per month....
Question:
6. 6.
Using weighted average delay [LO 19.1] A mail-order firm processes 5 300 cheques per month. Of these, 60 per cent are for $47 and 40 per cent are for $79. The $47 cheques are delayed two days on average;
the $79 cheques are delayed three days on average. Assume 30 days in a month.
1. What is the average daily collection float? How do you interpret your answer?
2. What is the weighted average delay? Use the result to calculate the average daily float.
3. How much should the firm be willing to pay to eliminate the float?
4. If the interest rate is 7 per cent per year, calculate the daily cost of the float.
5. How much should the firm be willing to pay to reduce the weighted average float to 1.5 days?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9781743768051
8th Edition
Authors: Stephen A. Ross, Rowan Trayler, Charles Koh, Gerhard Hambusch, Kristoffer Glover, Randolph W. Westerfield, Bradford D. Jordan