Determine the average daily float

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DEF, Inc has determined that it has three basic batch of collections with the following associated collection float:

Batch                                    Average Collections              Days of float

#1 (Local)                                     $10,000,000                          2

#2 (Regional)                               $5,000,000                            4

#3 (Distant)                                  $25,000,000                          6

Determine the average daily float for the above collections for a typical month.

Using the information from the above problem, assume that if DEF changed to a lockbox. Changing to the lockbox would have no effect on the local collections (Batch 1), but would reduce the regional float (Batch 2) by 1 day, and the Distant Float (Batch 3) by 2 days. If the cost of capital is 7%, what is the value of the float reduction?

Reference no: EM131528622

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