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Community Hospital has annual net patient revenues of $150 million. At the present time, payments received




Question;Community Hospital has annual net patient revenues of $150;million. At the present time, payments received by the hospital are not;deposited for six days on average. The hospital is exploring a lockbox;arrangement that promises to cut the six days to one day. If these funds;released by the lockbox arrangement can be invested at 8 percent, what will the;annual savings be? Assume the bank fee will be $2,000 per month.;2. St. Luke?s Convalescent Center has $200,000 in surplus;funds that it wishes to invest in marketable securities. If transaction costs;to buy and sell the securities are $2,200 and the securities will be held for;three months, what required annual yield must be earned before the investment;makes economic sense?;3. Your firm is considering the following three alternative;bank loans for $1,000,000;a) 10 percent loan paid at year end with no compensating;balance;b) 9 percent loan paid at year end with a 20 percent;compensating balance;c) 6 percent loan that is discounted with a 20 percent;compensating balance requirement;Assume that you would normally not carry any bank balance;that would meet the 20 percent compensating balance requirement. What is the;rate of annual interest on each loan?;4. An important source of temporary cash is trade credit;which does not actually bring in cash, but instead slows its outflow. Vendors;often provide discounts for early payment. What is the formula to determine the;effective interest rate if the discount is not utilized?


Paper#50705 | Written in 18-Jul-2015

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