Use the following information to answer the three questions.

DEF company is considering switching to an ACH based disbursement system. The system will ACH system will cost the company $20,000. DEF averages 500 checks per month and has a 10% annual cost of capital. Should DEF switch to ACH disbursing if they expect to save 20 cents per transaction?

		Yes
		No
		They would be indifferent
		Cannot be determined.

10 points

QUESTION 7

What is the breakeven annual cost of capital to make the firm indifferent between their current system and ACH?

		6%
		10%
		16.67%
		12.25%

10 points

QUESTION 8

What is the breakeven number of checks per month? Round to the nearest whole transaction.

		480
		8333
		833
		4000