Question
The company you work for is evaluating a proposal by your bank for services to reduce float time. Your company current float time is 3
The company you work for is evaluating a proposal by your bank for services to reduce float time. Your company current float time is 3 days. On average the checks processed per day is 1,000 and the average value of each check is $400. The opportunity cost per day is .01%. The bank proposes 4 lockboxes in strategic locations. The fee for the service is composed of two parts, the per check fee processed and the end of day wire transfer to your primary bank. The per check fee is $0.13 and end of day transfer fee is $25. Assume you accept the proposal of per check fee $0.13 and end of day wire transfer fee of $25.You think before presenting you analysis of the banks proposal, you should do some sensitivity analysis for possible changes next year in number of checks and amount of each check.
- Would this still be a good decision if the number of checks rose by 20% to 1,200 and value remained $400?
- Would this still be a good decision if the number of checks fell by 20% to 800 and value remained $400?
- Would this still be a good decision if the number of checks remained 1,000 but the average value of each check rose by 20% to $480?
- Would this still be a good decision if the number of checks remained 1,000 but the average value of each check fell by 20% to $320?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started