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In a typical month, the Jeremy Corporation receives 80 checks totaling \(\$ 156,000\). These are delayed four days on average. What is the average daily float?

Each business day, on average, a company writes checks totaling \(\$ 14,000\) to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling \(\$ 26,000\). The cash from the payments is available to the firm after two days. 1\. Calculate the company's disbursement float, collection float, and net float. 2\. How would your answer to part (a) change if the collected funds were available in one day instead of two?

Purple Feet Wine, Inc., receives an average of \(\$ 19,000\) in checks per day. The delay in clearing is typically three days. The current interest rate is .019 percent per day. 1\. What is the company's float? 2\. What is the most Purple Feet should be willing to pay today to eliminate its float entirely? 3\. What is the highest daily fee the company should be willing to pay to eliminate its float entirely?

A mail-order firm processes 5,300 checks per month. Of these, 60 percent are for \(\$ 55\) and 40 percent are for \(\$ 80\). The \(\$ 55\) checks are delayed two days on average; the \(\$ 80\) checks are delayed three days on average. 1\. What is the average daily collection float? How do you interpret your answer? 2\. What is the weighted average delay? Use the result to calculate the average daily float. 3\. How much should the firm be willing to pay to eliminate the float? 4\. If the interest rate is 7 percent per year, calculate the daily cost of the float. 5\. How much should the firm be willing to pay to reduce the weighted average float by 1.5 days?

It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter's management is considering a lockbox system to reduce the firm's collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are \(\$ 145,000\), and the required rate of return is 9 percent per year. 1\. What is the reduction in outstanding cash balance as a result of implementing the lockbox system? 2\. What is the dollar return that could be earned on these savings? 3\. What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the end of the month? What if the payment is due at the beginning of the month?

No More Pencils, Inc., disburses checks every two weeks that average \(\$ 93,000\) and take seven days to clear. How much interest can the company earn annually if it delays transfer of funds from an interest-bearing account that pays .015 percent per day for these seven days? Ignore the effects of compounding interest.

No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles \(\$ 4\) million in collections a day and requires a \(\$ 400,000\) compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks \(A\) and \(B\) will each handle \(\$ 2\) million of collections a day, and each requires a compensating balance of \(\$ 250,000\). No More Books' financial management expects that collections will be accelerated by one day if the eastern region is divided. Should the company proceed with the new system? What will be the annual net savings? Assume that the T-bill rate is 5 percent annually.