44) Which of the following statements is correct?
A) There is a greater likelihood of needing an unexpected loan when cash flows are relatively
constant over time.
B) The cost of borrowing affects the target cash balance.
C) Management’s desire to maintain a low cash balance has no effect on the borrowing needs of
a firm.
D) The target cash balance increases as the interest rate rises.
E) The target cash balance decreases as the order costs increase.
45) The Snow Hut has analyzed the carrying and shortage costs associated with its cash holdings
and determined they should ideally maintain a cash balance of $5,200. This $5,200 represents
which one of the following?
A) Target cash balance
B) Concentration balance
C) Available balance
D) Selected cash amount
E) Compensating balance
46) As it applies to the BAT model, opportunity costs are defined as:
A) the borrowing costs incurred.
B) interest foregone on cash held.
C) the cash needed for transaction purposes.
D) costs incurred to replenish a cash account.
E) the costs incurred when securities are sold.
47) The Hobby Shop has a checking account with an available balance of $617 and a check book
balance of $702. There are $238 in uncollected deposits. What is the amount of the disbursement
float on this account?
A) $379
B) $323
C) $153
D) $196
E) $1,081
48) On an average day, Plastics Enterprises writes 23 checks with an average amount of $842.
These checks clear the bank in an average of three days. What is the average amount of the
disbursement float?
A) $19,366
B) $2,526
C) $24,654
D) $58,098
E) $73,962
49) On average, LB Inc. receives 138 payments each day with an average value of $42 each.
These payments clear the bank in an average of 1.3 days. In addition, it disburses 2.2 checks a
day with an average amount of $2,250. These checks clear the bank in two days. What is the
average amount of the collection float?
A) $18,473
B) $3,401
C) $7,535
D) $41,965
E) $49,500
50) When Chris balanced her business check book, she had an adjusted bank balance of $8,911.
She had three outstanding deposits worth $349 each and seven checks outstanding with a total
value of $948. What is the amount of the collection float on this account?
A) $1,090
B) $1,047
C) $99
D) $806
E) $948
51) Lasko’s Mart has an available balance of $2,315. A deposit of $789 was made this morning
and is included in the bank’s balance. There are three checks outstanding with a value of $289
each. What is the net float?
A) $867
B) $78
C) $789
D) −$867
E) −$78
52) Southern Meals generally receives four checks a month. One of the checks is for $569 and
has a collection delay of three days. The others amounts are $1,318, $907, and $113 and have a
one-day delay. Given this information, what is the amount of the average daily float? Assume
each month has 30 days.
A) $135
B) $106
C) $94
D) $148
E) $113
53) Hoyes Lumber generally receives three checks a month in the amounts of $654, $987, and
$1,310. The $987 check has a two-day collection delay while the others have a one-day delay.
Given this information, what is the amount of the average daily float? Assume each month has
30 days.
A) $131
B) $143
C) $147
D) $128
E) $122
54) The Blue Star generally receives only three checks a month with amounts of $14,809,
$16,211, and $14,750. These checks all have a collection delay of 1.5 days. Given this
information, what is the amount of the average daily float? Assume every month has 30 days.
A) $1,971
B) $2,289
C) $2,351
D) $1,526
E) $2,833
55) Hot Tub Builders sells to three retail dealers under an agreement wherein each dealer pays
monthly. The average payments are $148,500, $162,900, and $74,500 from these dealers. Each
payment has a collection delay of 1.5 days. What is the amount of the average daily receipts
assuming each month has 30 days?
A) $12,333
B) $12,863
C) $19,295
D) $16,840
E) $18,218
56) Atlas Builders deals strictly with five customers. The average amounts these customers pay
per month are $17,400, $15,900, $22,500, $57,800, and $64,300. The smaller two payments have
a collection delay of three days while the others only have a one-day delay. Assume each month
has 30 days. What is the amount of the average daily receipts?
A) $5,930
B) $6,920
C) $8,150
D) $14,140
E) $16,680
57) Cross Trucking provides services exclusively for three customers. The monthly amounts paid
by these customers along with their respective collection delays are: $81,900 with 1.5 days,
$47,300 with 2 days, and $68,400 with 2.5 days. Given this information, what is the weighted
average delay?
A) 2.11 days
B) 1.94 days
C) 1.97 days
D) 2.06 days
E) 2.01 days
58) High Brow Express deals strictly with two customers. The payment from Customer A
averages $537,400 and has a collection delay of three days. Customer B’s average payment is
$737,500 and has a one-day delay. What is the weighted average delay assuming every month
has 30 days?
A) 1.79 days
B) 1.62 days
C) 2.02 days
D) 2.07 days
E) 1.84 days
59) Specialty Co. deals strictly with three customers who pay monthly amounts of $340,800,
$262,900, and $81,300. The $81,300 payment has a collection delay of 2.5 days while the other
two have a delay of 1.5 days. What is the weighted average delay assuming each month has 30
days?
A) 1.98 days
B) 1.78 days
C) 2.01 days
D) 1.57 days
E) 1.62 days
60) On an average day, GDF Corp. receives $7,218 in checks from customers. These checks
clear the bank in an average of 1.6 days. The applicable daily interest rate is .028 percent. What
is the present value of eliminating the float? Assume each month has 30 days.
A) $3
B) $6
C) $97
D) $11,549
E) $7,218
61) On an average day, Towne Hardware receives $3,028 in checks from customers. These
checks clear the bank in an average of 1.84 days. The applicable daily interest rate is .021
percent. What is the maximum amount this store should pay to completely eliminate its
collection float? Assume each month has 30 days.
A) $421
B) $1,288
C) $2,109
D) $4,637
E) $5,572
62) On an average day, BJ Footwear receives $26,482 in checks from customers. These checks
clear the bank in an average of 1.3 days. The applicable daily interest rate is .016 percent. What
is the highest daily fee that should be paid to completely eliminate the collection float? Assume
each month has 30 days.
A) $4.24
B) $5.51
C) $5.78
D) $4.18
E) $3.29
63) On an average day, WW Co. receives $329,418 in checks from customers. These checks
clear the bank in an average of 1.46 days. The applicable daily interest rate is .019 percent. What
is the highest daily fee that should be paid to completely eliminate the collection float? Assume
each month has 30 days.
A) $110.72
B) $91.38
C) $97.20
D) $62.59
E) $99.17
64) Each business day, on average, a company writes checks totalling $41,627 to pay its
suppliers. The usual clearing time for these checks is 3.2 days. Meanwhile, the company is
receiving payments from its customers each day, in the form of checks, totalling $59,948. The
cash from the payments is available after 1.5 days. What is the amount of the average net float?
A) $57,772
B) $43,284
C) $42,318
D) $57,366
E) $49,507
65) Freedom Wine receives an average of $684,006 in checks per day. The delay in clearing is
typically 1.3 days. The current interest rate is .024 percent per day. Assume each month has 30
days. What is the highest daily fee the company should be willing to pay to eliminate its float
entirely?
A) $164
B) $248
C) $219
D) $213
E) $237
66) Assume a check for $127,000 has a collection delay of 1.8 days while a check for $218,900
has a collection delay of 1.5 days. If these are the only two checks received in a 30-day period,
what is the weighted average delay?
A) 1.63 days
B) 1.61 days
C) 1.56 days
D) 1.58 days
E) 1.65 days
67) A mail-order company processes 8,200 checks per month. Of these, 64 percent are for $39
while the remainder are for $69. The $39 checks have a collection delay of 2.1 days on average
while the $69 checks are delayed 1.8 days on average. Assume each month has 30 days. The
interest rate is 5.2 percent per year. What is the maximum amount that should be paid to reduce
the weighted average float to 1.5 days?
A) $10,990
B) $6,130
C) $8,650
D) $5,825
E) $9,675
68) Your average customer is located 2.9 mailing days away from your office. On average, it
takes your staff 1.1 days to process incoming payments and an average of .65 days for your
funds to be available for use once you have made your bank deposit. What is your total
collection time if 98 percent of your customers pay by mail while the others drop their payment
off at your office?
A) 4.65 days
B) 4.63 days
C) 4.57 days
D) 4.61 days
E) 4.59 days
69) It takes your staff 1.5 days to prepare and mail out all the monthly customer statements. On
average, the mail time between your office and your customers is 3.3 days. Customer checks take
an average of 1.2 days to clear the bank. You have determined that your total average collection
time is 6.3 days. How long, on average, does it take your staff to process the payments from
customers?
A) 1.8 days
B) .3 days
C) .7 days
D) 1.4 days
E) 1.1 days
70) Currently, it requires two days to process the checks received in the mail from your
customers. The average mail time is 2.7 days and the check clearing time is .97 days. If you
adopt a lockbox system, the mail time will be cut in half. In addition, if employees are
reassigned, checks could be processed in one day. How long will your collection time be if both
the lockbox system and the job reassignments are implemented?
A) 3.63 days
B) 3.25 days
C) 3.32 days
D) 3.29 days
E) 3.36 days
71) Wilson Publishers is considering implementing a lockbox system that is expected to reduce
average collection time by 2.5 days. On an average day, the company receives 1,327 checks with
an average value of $49 each. The daily interest rate on Treasury bills is .011 percent. What is
the anticipated amount of the daily savings if this system is implemented?
A) $2.48
B) $13.29
C) $14.45
D) $17.88
E) $15.78
72) Roger’s Distributors receives an average of 82 checks a day with an average check amount of
$16,329. If a lockbox system is implemented the average collection time should decrease by an
average of 1.7 days. The daily interest rate on Treasury bills is .009 percent. What is the amount
of the expected daily savings of the lockbox system?
A) $192.04
B) $196.92
C) $114.95
D) $222.42
E) $204.86
73) Global Markets receives an average of 122 checks a day with an average amount of $498 per
check. The installation of a lockbox system should reduce the average collection time by 3.1
days at a cost of $.32 per check. The daily interest rate on Treasury bills is .012 percent. What is
the average daily cost of the lockbox system?
A) $7.23
B) $44.87
C) $39.04
D) $8.11
E) $121.02