Should the company proceed with the new system

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Reference no: EM131623010

lepreau books corp. has an agreement with hampton bank whereby the bank handles 6 million in collections a day and requires a 375000 compsesating balance. Lepreau books is contemplating cancelling the agreement and dividing its eastern region so that two other banks will handle its business. Bank A and B will each handle 3 million of collections a day, and each requies a compensating balance of 250,000. Lepreau books finanical mangement expects that collections will be accelerated by one day if the eastern region divided. Should the company proceed with the new system? what will be the annual net savings? assume that the t-bill is 2.5 annually.

Reference no: EM131623010

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