Business

Beasley Enterprises has an agreement with Downtown Bank whereby the bank handles $1.16 million in collections a day and requires a $750,000 compensating balance. Beasley is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $.58 million of collections per day and each requires a compensating balance of $400,000. Beasley's financial management expects that collections will be accelerated by one day if the eastern region is divided. The T-bill rate is 2.65 percent annually. What is the amount of the annual net savings if this plan is adopted?