Float Simon Corporation has daily cash receipts of $65,000. A recent analysis of
its collections indicated that customers’ payments were in the mail an average of
2.5 days. Once received, the payments are processed in 1.5 days. After payments
are deposited, it takes an average of 3 days for these receipts to clear the banking
a. How much collection float (in days) does the firm currently have?
b. If the firm’s opportunity cost is 11%, would it be economically advisable for the
firm to pay an annual fee of $16,500 to reduce collection float by 3 days?
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