A 525 b 1050 c 1575 d 2250 188 113 cso 2b4b los 2b4g

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a. $525. b. $1,050. c. $1,575. d. $2,250.
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188 113. CSO: 2B4b LOS: 2B4g The Rolling Stone Corporation, an entertainment ticketing service, is considering the following means of speeding cash flow for the corporation. Lock Box System. This would cost $25 per month for each of its 170 banks and would result in interest savings of $5,240 per month. Drafts. Drafts would be used to pay for ticket refunds based on 4,000 refunds per month at a cost of $2.00 per draft, which would result in interest savings of $6,500 per month. Bank Float. Bank float would be used for the $1,000,000 in checks written each month. The bank would charge a 2% fee for this service, but the corporation will earn $22,000 in interest on the float. Electronic Transfer. Items over $25,000 would be electronically transferred; it is estimated that 700 items of this type would be made each month at a cost of $18 each, which would result in increased interest earnings of $14,000 per month. Which of these methods of speeding cash flow should Rolling Stone Corporation adopt? a. Lock box and electronic transfer only. b. Bank float and electronic transfer only. c. Lock box, drafts, and electronic transfer only. d. Lock box, bank float, and electronic transfer only. 114. CSO: 2B4b LOS: 2B4g JKL Industries requires its branch offices to transfer cash balances once per week to the central corporate account. A wire transfer costs $12 and assures the cash is available the same day. A depository transfer check (DTC) costs $1.50 and generally results in funds being available in 2 days. JKL’s cost of short-term funds averages 9%, and they use a 360- day year in all calculations. What is the minimum transfer amount that would justify the cost of a wire transfer as opposed to a DTC? a. $21,000. b. $24,000. c. $27,000. d. $42,000. 115. CSO: 2B4b LOS: 2B4l The establishment and maintenance of a zero-balance account (ZBA) typically reduces all of the following except a. the cost of cash management. b. the disbursement float. c. excess bank balances. d. management time.
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189 116. CSO: 2B4c LOS: 2B4o Which one of the following instruments would be least appropriate for a corporate treasurer to utilize for temporary investment of cash? a. U.S. Treasury bills. b. Money market mutual funds. c. Commercial paper. d. Municipal bonds. 117. CSO: 2B4c LOS: 2B4n Which one of the following statements best characterizes U.S. Treasury bills? a. They have no coupon rate, no interest rate risk, and are issued at par. b. They have an active secondary market, one to twenty-four month maturities, and monthly interest payments. c. They have an active secondary market, the interest received is exempt from federal income tax, and there is no interest rate risk. d. They have no coupon rate, no default risk, and interest received is subject to federal income tax. 118. CSO: 2B4c LOS: 2B42B4dn The Duoplan Company is determining the most appropriate source of short-term funding. Trade credit terms from suppliers are 2/30, net 90. The rate for borrowing at the bank is 12%. The company has also been approached by an investment banker offering to issue Duoplan’s commercial paper. The commercial paper would be issued quarterly in increments of $9.1 million with net
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