Porkys Sausage Co. shows the following values on its corporate books.

Porkys Sausage Co. Corporate Books:
Initial amount	$	10,000
Deposits	+	80,000
Cheques		50,000
Balance	$	40,000

The initial amount on the banks books is also $10,000. However, only $70,000 in deposits has been recorded and only $25,000 in cheques have cleared.

Fill in the table below and indicate the amount of float. (Enter all values as positive value.)

Porkys Sausage Co. Bank Books:
Initial amount	$10,000
Deposits
Cheques
Balance	$
Float	$

Sheilas Society Clothing Manufacturer has collection centres around the country to speed up cash collections. The company also makes its disbursements from remote disbursement centres, so cheques written by Sheilas take longer to clear the bank. Collection time has been reduced by two days and a half days and disbursement time has been increased by one and a half days because of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum.

a. If the firm has $4.60 million per day in collections and $3.60 million per day in disbursements, how many dollars has the cash management system freed up? (Enter the answer in dollars not in millions.)

Freed-up funds $

b. How much can Sheilas earn per year on short-term investments made possible by the freed-up cash? (Enter the answer in dollars not in millions.)

Interest on freed-up cash $

Aurora Electrical Company of Yellowknife ships wind turbines throughout the country. Mr. Beam, the financial manager, has determined that through the establishment of local collection center around the country, he can speed up the collection of payments by two days. Furthermore, the cash management department of the companys bank has indicated to him that he can defer payments on his accounts by one day without offending suppliers. The bank has a remote disbursement in New Brunswick.

a. If Aurora Electrical Company has $2.65 million per day in collections and $1.13 million per day in disbursements, how many dollars will the cash management system free up? (Enter the answer in dollars not in millions.)

Freed-up funds $

b. If Aurora Electrical Company can earn 9% percent per annum on freed-up funds, how much income can be generated? (Enter the answer in dollars not in millions.)

Interest on freed-up cash $

c. If the total cost of the system is $440,000 should it be implemented?

• Yes

• No