Your banker has analyzed your company account and has suggested that her bank has a cash management package for you. She suggests that with a concentration banking system, your float can be reduced by three days on average. You, of course, are delighted $($you$$re not sure why$),$ but you do know your average daily collections amount to $$395,000.$ Your opportunity cost of funds is $9$ percent. The bank provides this service for $$61,500$ plus a compensating balance in your current account of $$84,000.($A compensating balance is the amount you are required to maintain interest free at that bank.$)$

a$.$ Is this package worth it$?$

multiple choice

Yes

No

b$.$ By how much? $($Negative answer should be indicated by a minus sign.$)$

Annual Saving $