What would be the increase in firm average cash balance

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Reference no: EM131306497

Note: When converting annual data to daily data or vice versa in these problems, assume there are 365 days per year.

Problem 1:

The White Oak Company’s annual sales are $219 million. An average of 9 days elapses between when a customer mails its payment and when the funds become usable by the firm.

a. If the company could speed up the collection of funds by 2 days, what would be the increase in the firm’s average cash balance?

b. Assuming that these additional funds can be invested in marketable securities that yield 7 percent per year, determine the increase in White Oak’s annual (pretax) earning.

Reference no: EM131306497

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