Cash float. The LML Corporation opened two more dealerships in Cabanatuan City. Nueva Ecija and Lucena City, Quezon. All payments by these dealers are in check, sent by mail, averaging about P420,000 per week. At present, these payments become available to LML Corporation on the sixth day, on the average. after the check is written.

Required:

1. How much money is tied up during the float period?

2. The company is considering weekly pick ups from the dealers to reduce the delay. In all, two (2) cars will be needed and two (2) additional people hired for a total cost of P60,000 per year. This would reduce the delay by four (4) days. The present opportunity cost of funds to the company is the average money market rate of 24% per year. Should the company undertake this plan?

3. A commercial bank with a large branch network offered to do the collection for the company through its Cabanatuan City and Lucena City branches. This procedure will reduce the delay by 2 days and will cost the company about P45,000 annually in telecommunications and collection charges. Should the company accept the offer?