Problem 7-1 Cost-benefit analysis of cash management [LO7-2] City Farm insurance has coliection centers across...
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Problem 7-1 Cost-benefit analysis of cash management [LO7-2] City Farm insurance has coliection centers across the country to speed up collections. The compary aso makes its disbursements from remote disbursement centers, so the firm's checks will take longer to clear the bank. Collection time has been reduced by three and one-half days and disbursement time increased by one and one haff days becouse of these policies. Excess funds are being invested in short-term instruments yielding 5 percent per annum. a. If City Farm has $4,00 mililion per day in collections and $3.10 million per day in disbursements, how many dollars has the cash management system freed up? (Enter your answer in dollars not in millions (c.9.51,234,567) ) b. How much can City Farm earn in dollars per year on shortterm investments made possibie by the freed-up caih? (Enter you? answer in dollars not in millions (0,94,$1,236,5677
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