11 NPV and Reducing Float Starthub Ltd has an agreement with its bank whereby the bank handles Rm500 million in collections a day and requires a Rm40,000,000 compensating balance. Starthub is contemplating cancelling the agreement and dividing its Malaysian activities so that two other banks will handle its business. Banks A and B will each handle Rm200 million of collections a day, and each requires a compensating balance of Rm12 million. Starthub’s financial manager expects that collections will be accelerated by one day if the Malaysian activities are divided between two banks. Should the company proceed with the new system? What will be the annual net savings? Assume that the T-bill rate is 2 per cent annually.