1. Gale Supply estimates that its customers payments are in the mail for 3 days and, once received, are processed in 2 days. After the payments are deposited in the firms bank, the bank makes the funds available to the firm in 2.5 days. The firm estimates its total annual collections from credit customers, received at a constant rate, to be $ 87 million. Its annual opportunity cost of funds is 9.5%. Assume a 365- day year.

A. How many days of collection float does Gale Supply have?

B. What is the current annual dollar cost of Gale Supplys collection float?

C. If the installation of an electronic invoice presentment and payment (EIPP) system would result in a 4- day reduction in Gales collection float, how much could the firm earn annually on this float reduction?

D. Based on your findings in part ( c), should Gale install the EIPP system if its annual cost is $ 85,000? Explain your recommendation.