1. Sheila's Society Clothing Manufacturer has collection centres around the country to speed up cash collections. The company also makes its disbursements from remote disbursement centres, so cheques written by Sheila's take longer to clear the bank. Collection time has been reduced by two and onehalf days and disbursement time has been increased by one and onehalf days because of these policies. Excess funds are being invested in shortterm instruments yielding 6 percent per annum. If the firm has $4 million per day in collections and $3 million per day in disbursements, how many dollars has the cash management system freed up?

How much can Sheila's earn per year on shortterm investments made possible by the freedup cash?

2. Leeft Bank offers to reduce the collection time for your company's daily cash receipts by two days with its cash management system. This service will cost you $15,000 per year and you will be required to keep a $10,000 compensating balance in your account. Currently, shortterm money market rates average 5 percent. If you anticipate annual sales of $46.355 million, would you accept the bank's offer?

3. Compute the cost of not taking the following trade discounts:

1/10, net 20

2/15, net 30

2/10, net 45

3/10, net 180

4. Little Kimi Clothiers can borrow from its bank at 6 percent to take a cash discount. The terms of the cash discount are 2/15 net 90. Should the firm borrow the funds?

5. Neveready Flashlights Inc. needs $300,000 to take a cash discount of 2/10, net 70. A banker will loan the money for 60 days at an interest cost of $5,500.

What is the annual rate on the bank loan?

How much would it cost (in percentage terms) if the firm did not take the cash discount, but paid the bill in 70 days instead of 10 days?

Should the firm borrow the money to take the discount?

d. If the banker requires a 15 percent compensating balance, how much must the firm borrow to end up with the $300,000?

e. What would be the effective interest rate in part d if the interest charge for 60 days were $6,850? Should the firm borrow with the 20 percent compensating balance? (The firm has no funds to count against the compensating balance requirement.)

PLEASE SHOW CALCULATIONS- THANK YOU!!