On an average day, GDF Corp. receives $7,218 in checks from customers. These checks clear the bank in an average of 1.6 days. The applicable daily interest rate is .028 percent. What is the present value of eliminating the float? Assume each month has 30 days.

Question

Quizplus · Accepted Answer

The present value of eliminating the float can be calculated using the formula:

PV = (Check amount * Daily interest rate * Float days) / (1 + Daily interest rate * Float days)

In this case, the check amount is $7,218, the daily interest rate is 0.028%, and the float days is 1.6.

PV = (7218 * 0.00028 * 1.6) / (1 + 0.00028 * 1.6) = $11,549

Therefore, the present value of eliminating the float is $11,549, which is option D.

On an Average Day, GDF Corp