# Ch19+Answers+to+assigned+problems+v6 - CHAPTER 19 CASH AND...

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CHAPTER 19 CASH AND LIQUIDITY MANAGEMENT Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. The final answer for each problem is found without rounding during any step in the problem. Basic 1. The average daily float is the average amount of cheques received per day times the average number of days delay, divided by the number of days in a month. Assuming 30 days in a month, the average daily float is: Average daily float = 6(\$85,000)/30 Average daily float = \$17,000 2. a. The disbursement float is the average monthly cheques written times the average number of days for the cheques to clear, so: Disbursement float = 4(\$25,000) Disbursement float = \$100,000 The collection float is the average monthly cheques received times the average number of days for the cheques to clear, so: Collection float = 2(–\$40,000) Collection float = –\$80,000 The net float is the disbursement float plus the collection float, so: Net float = \$100,000 – 80,000 Net float = \$20,000 b. The new collection float will be: Collection float = 1(–\$40,000) Collection float = –\$40,000 And the new net float will be: Net float = \$100,000 – 40,000 Net float = \$60,000 3. a. The collection float is the average daily cheques received times the average number of days for the cheques to clear, so: Collection float = 4(\$9,000) Collection float = \$36,000 b. The firm should pay no more than the amount of the float, or \$36,000, to eliminate the float. c. The maximum daily charge the firm should be willing to pay is the collection float times the daily interest rate, so: 152

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Maximum daily charge = \$36,000(.00025) Maximum daily charge = \$9.00 4. a. Total float = 4(\$16,000) + 5(\$3,000) Total float = \$79,000 b. The average daily float is the total float divided by the number of days in a month. Assuming 30
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## This note was uploaded on 12/12/2010 for the course FNCE FNCE 3P93 taught by Professor Nd during the Fall '10 term at Brock University.

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Ch19+Answers+to+assigned+problems+v6 - CHAPTER 19 CASH AND...

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