Suppose the Western Gas & Electric Company (WGEC) currently uses a centralized collection system that has all monthly customer payments remitted to its account at the Twelfth National Bank. For this service, WGEC pays a flat monthly service charge of $900. Last week, Richard Smith, WGEC's treasurer, received the following two offers to process the company's customer payments: Proposal 1: This offer, from Utility Payment Solutions Inc., proposes to process WGEC's monthly payments for a fee of $0.15 per payment and a monthly service charge of $125. Proposal 2: This offer, from Eleventh National Bank, does not impose per-payment fees or monthly service charges; rather, it requires a compensating balance of $130,000 in an account maintained at the bank. WGEC receives an average of 45,000 payments per year, and the company earns an average return of 7.50% on any available funds. Help Richard Smith complete the following table by calculating the annual cost of each payment-processing proposal Payment-Processing System-Annual Cost $10,800 Current system Utility Payment Solutions Inc.'s system (Proposal 1) Eleventh National Bank's system (Proposal 2) Based on calculations for each proposal, which recommendation and justification is best to give to Richard Smith? O The current system should be retained, since its annual cost is less than those proposed by Eleventh National O Eleventh National Bank is offering the best plan, which is expected to save approximately $1,050 per year O Utility Payment Solutions Inc. is offering the best plan, which is expected to provide an annual savings of Bank and Utility Payment Solutions Inc. compared with the cost of WGEC's current system. approximately $2,550 compared with the cost of WGEC's current system Suppose the Western Gas & Electric Company (WGEC) currently uses a centralized collection system that has all monthly customer payments remitted to its account at the Twelfth National Bank. For this service, WGEC pays a flat monthly service charge of $900. Last week, Richard Smith, WGEC's treasurer, received the following two offers to process the company's customer payments: Proposal 1: This offer, from Utility Payment Solutions Inc., proposes to process WGEC's monthly payments for a fee of $0.15 per payment and a monthly service charge of $125. Proposal 2: This offer, from Eleventh National Bank, does not impose per-payment fees or monthly service charges; rather, it requires a compensating balance of $130,000 in an account maintained at the bank. WGEC receives an average of 45,000 payments per year, and the company earns an average return of 7.50% on any available funds. Help Richard Smith complete the following table by calculating the annual cost of each payment-processing proposal Payment-Processing System-Annual Cost $10,800 Current system Utility Payment Solutions Inc.'s system (Proposal 1) Eleventh National Bank's system (Proposal 2) Based on calculations for each proposal, which recommendation and justification is best to give to Richard Smith? O The current system should be retained, since its annual cost is less than those proposed by Eleventh National O Eleventh National Bank is offering the best plan, which is expected to save approximately $1,050 per year O Utility Payment Solutions Inc. is offering the best plan, which is expected to provide an annual savings of Bank and Utility Payment Solutions Inc. compared with the cost of WGEC's current system. approximately $2,550 compared with the cost of WGEC's current system
