Uneblej.com is an online retail company, which operates in Albania. It has daily cash receipts of L150,000. Its CFO is analyzing the time it takes for the collection of the customers’ payment to clear the banking system. From the analysis it appears that it takes 2 days for the online payment to be processed before it is transferred to the bank. Then it takes another 3 days for the bank to process the payment and make it available to Uneblej.com.

a. How much collection float (in days) does the company currently have?

b. If its opportunity cost is 10%, would it be economically advisable for the company to pay an annual fee of L18,000 to reduce collection float by 3 days? Explain.

c. What would the company’s opportunity cost have to be to make the L18,000 fee worthwhile?