Question
The Wild Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban's customers. Wild's financial manager
The Wild Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban's customers. Wild's financial manager believes the new system would decrease its collection float by as much as 5 days. The new bank would require a compensating balance of $30,000, whereas its present bank has no compensating balance requirement.Wild's average daily collections are $10,000, and it can earn 8% on its short-term investments. Should Wild make the switch? (Assume the compensating balance at the new bank will be deposited in a non-interest-earning account.)
-As a result of using the electronic funds transfer system, the amount of collection float freed up by the loan is $ . (Round to the nearest dollar.) -The amount that becomes available to Wild Corporation after setting aside the compensating balance is $ . (Round to the nearest dollar.) -Wild (answer either "should" or "should not") switch banks.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started