16.3 Suppose one of the suppliers to Seattle Health System offers terms of 3/20, net 60. a. When does the system have to pay its bills from this supplier? b. What is the approximate cost of the costly trade credit offeredby this supplier? (Assume 360 days per year.) 16.6 Fargo Memorial Hospital has annual net patient service rever of $14,400,000. It has two major third-party payers, plus some of its patients are self-payers. The hospital's patient accounts manager estimates that 10 percent of the hospital's paying patients (its self payers) pay on Day 30, 60 percent pay on Day 60 (Payer A), and 30 percent pay on Day 90 (Payer B). (Five percent of total billings end up as bad debt losses, but that is not relevant for this problem.) a. What is Fargo's average collection period? (Assume 360 days per year throughout this problem.) b. What is the firm's current receivables balance? c. What would be the firm's new receivables balance if a newly proposed electronic claims system resulted in collecting from third-party payers in 45 and 75 days, instead of in 60 and 90 days? d. Suppose the firm's annual cost of carrying receivables was 10 percent. If the electronic claims system costs $30,000 a year t lease and operate, should it be adopted? (Assume that the entire receivables balance has to be financed.)