If city farm has 5 million per day in collections and

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City Farm Insurance has collection centers across the countryto speed up collections. The company also makes its disbursementsfrom remote disbursement centers so checks written by City Farmtake longer to clear the bank. Collection time has been reduced bytwo days and disburesemtn time increased by one day because ofthese polocies. Excess funds are being invested in short-terminstruments yielding 12 percent per annum.

A. If city Farm has $5 million per day in collections and $3million per day in disbursements, how many dollars has the cashmanagement system freed up?

B. How much can City Farm earn in dollars per year onshort-term investments made possible by the freed-up cash? Thank You!

Reference no: EM13615605

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