Contemplating canceling the agreement

Assignment Help Financial Management

Reference no: EM131347260

No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $3.6 million in collections a day and requires a $280,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $1.8 million of collections a day, and each requires a compensating balance of $130,000. No More Books’ financial management expects that collections will be accelerated by one day if the eastern region is divided. What is the NPV of accepting the system? What will be the annual net savings? Assume that the T-bill rate is 2.4 percent annually.

Reference no: EM131347260

Questions Cloud

What is this banks internal capital growth rate : A bank has a net profit margin of 5.25 percent. It has an asset utilization ratio of 45 percent and has an equity multiplier of 12. It retains 40 percent of its earnings each year. What is this bank's internal capital growth rate?

Bank is required to maintain an average daily balance : A bank is required to maintain an average daily balance at the Fed of $600 million. In the first 2 days of the maintenance period, it maintains a balance of $450 million, the next three days it maintains a balance of $700 million, the next two days i..

Mutual funds are an appropriate investment vehicle : The Reverend Mark Thomas is the minister of a church in the San Diego area. He is married, has one young child, and earns a “modest income.” Because religious organizations are not notorious for their generous retirement programs, the reverend has de..

What is the growth rate of total factor productivity : Suppose labor's share of GDP is 70 percent and capital's is 30 percent, real GDP is growing at a rate of 4 percent a year, the labor force is growing at 2 percent, and the capital stock is growing at 3 percent. What is the growth rate of total fac..

Contemplating canceling the agreement : No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $3.6 million in collections a day and requires a $280,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region..

National bank maintains an average clearing balance : The Hollingsworth National Bank maintains an average clearing balance of $7,000,000 with the Federal Reserve. The Federal Funds rate is currently 5.25 percent. What is the credit the bank will earn over the maintenance period that can be used to offs..

Delays transfer of funds from interest-bearing account : No More Pencils, Inc., disburses checks every two weeks that average $83,000 and take six days to clear. How much interest can the company earn annually if it delays transfer of funds from an interest-bearing account that pays .011 percent per day fo..

What could be the impact if there was error in understanding : What could be the impact if there was an error in understanding? An explanation for how you will remember the components of your topic. Is there an acronym you created? Can you create a quick limerick?

What is the bank liability liquidity reserve : A bank currently has $50 million in stable deposits against which they want to keep 10% reserves, $100 in vulnerable deposits against which they want to keep 40% reserves, and they have $50 million in "hot money" deposits against which they want to k..

User Account

All Pages