5. Your firm sells to retail customers nationwide. Your bank has just completed a lockbox study of your cash collection system. After a through study of your remittance information, they categorized your customers into 3 groups as shown below. Notice that the consultants expressed remittance data on an average daily basis assuming 30 days in a month. Your opportunity cost of funds is 10%. Using the complete enumeration model, determine which bank offers the lowest cost (hint: 1 bank is optimal) and the customer allocation among the chosen sites.

Customer group	Average monthly remittances		Days of float
	Number	Face value	Bank A	Bank B	Bank C
1	50,000	$98	5	6	1
2	100,000	55	1	4	3
3	75,000	125	3	5	4
Variable processing costs			$0.55	$0.40	$0.70
Fixed costs			$350	$500	$250

6. The cash manager of Verematic, Inc., is contemplating the choice between using a wire transfer and an EDT. He estimates that his investment opportunity rate is 9%. The banks ECR is currently 4%, and the reserve requirement is 12%. His bank account officer informs his that a wire transfer will cost $15 and will provide collected balances 1 day earlier than the EDT, which costs $0.30.

1. Assume that the balances transferred are above the balances required to compensate the deposit bank for its services. Calculate the minimum transfer balance required to justify the use of a wire transfer.
2. Assume that the balances transferred are below the balances required to compensate the deposit bank. Calculate the minimum transfer balance required to justify the use of a wire transfer.