Reduction of mail float-net savings

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Reference no: EM13130584

Pronet has annual sales of $724 million from its 600 retail stores. Pronet can reduce its mail float by 2 days through the use of wire transfers. The annual cost of the wire transfers is expected to be $105,610. If Pronet's cost of short-term funds is 9.75 percent, should the change to wire transfers be made? Assuming 365 days per year. This problem is to determine interest savings.

The following are the four answers to choose from:

a. No, loss of $247,340

b. Yes, savings of $281,185

c. Yes, savings of 474,582

D. No, loss of $105,610

Reference no: EM13130584

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