Cash Management at Webb Corporation Webb Corporation was founded 20 years ago by its president, Holly Lennon, the company's treasurer, has been examining Bryan Webb. The company originally began as a mail-order the current cash collection policies. On average, each lockbon company, but it has grown rapidly in recent years, in large part center handles $235,000 in payments each day. The company; due to its website. Because of the wide geographical dispersion current policy is to invest these payments in short-term mar. of the company's customers, it currently employs a lockbox ketable securities daily at the collection center banks. Every system with collection centers in San Francisco, St. Louis, two weeks, the investment accounts are swept; the proceeds Atlanta, and Boston. are wire-transferred to Webb's headquarters in Dallas to met. the company's payroll. The investment accounts cach earn 013 percent per day, and the wire transfers cost .20 percent of the amount transferred. Holly has been approached by Third National Bank, located just outside Dallas, about the possibility of setting up a concentration banking system for Webb Corp. Third National will accept each of the lockbox center's daily payments via automated clearinghouse (ACH) transfers in lieu of wire transfers, The ACH-transferred funds will not be available for use for one day. Once cleared, the funds will be deposited in a short-term account, which will yield .013 percent per day. Each ACH transfer will cost $250. Bryan has asked Holly to determine which cash management system will be the best for the company. As her assistant, Holly has asked you to answer the following

QUESTIONS

1. What is Webb Corporation's total net cash flow available from the current lockbox system to meet payroll?

2. Under the terms outlined by Third National Bank, should the company proceed with the concentration banking system?

3. What cost of ACH transfers would make the company indifferent between the two systems?