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Newman Products has received proposals from several banks to establish a lockbox system to speed up receipts. Newman receives an average of 700 checks per day averaging $1,800 each, and its cost of short-term funds is 7 percent per year. Assuming that all proposals will produce equivalent processing results and using a 360-day year, which one of the following proposals is optimal for Newman?
Suggested Answer: C
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Choice 'c' is correct. The optimal proposal is that which has the lowest cost for Newman.
Thus, the lowest cost is 'c' at $122,500.
Choices 'a', 'b', and 'd' are incorrect, per the above calculations/Explanation:.
8 comments · newest first
SH
Shaniqua
11 months ago
Isn't $1,750,000 for a compensating balance a bit excessive?
RI
Rickie
12 months ago
Totally agree, option D looks pretty reasonable!
TE
Tenesha
12 months ago
Wait, how does a compensating balance even work?
AN
Antonette
12 months ago
I think option B could be the best deal overall.
LE
Levi
1 year ago
A flat fee of $125,000 seems high for 700 checks a day.
JU
Justa
1 year ago
I'm a bit confused on this one. Is the Governance Approach also a possibility? I feel like there might be some rules or standards we need to follow when packaging and communicating the data.
ST
Stephane
1 year ago
I'm a bit confused on this one. Should we be looking at content sharing sites like Facebook or professional networking sites? I'm not sure which option would be the best fit for this startup's needs.
WA
Wayne
1 year ago
I'm a bit confused by the options here. Is "use tables;" or "desc tables;" also a valid way to view all tables in a project?