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Problem 71 (Algo) Cost-benefit analysis of cash management [LO7-2] City Farm insurance has collection centers across the country to speed up collections. The company also
Problem 71 (Algo) Cost-benefit analysis of cash management [LO7-2] City Farm insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers, so the firm's checks wilt take longer to clear the bank. Collection time has been reduced by two and one-haif days and disbursement time increased by one and one half days becouse of these policies. Excess funds are being ifvested in shoit-term instruments yleiding 5 percent per annum. a. If City Farm has $4.30 million per day in collections and $3.50 millon per day in distursements, how many dollars has the cash management system freed up? Note: Enter your answer in dollars not in millions (e.g. $1.234,567 ). b. How much can City farm eorn in dollars per yeor on short-term investments made possible by the freed-up cash? Note: Enter your answer in dollars not in millions (e.9.,$1,234,567)
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