Lone Star Technologies has annual sales of $336 million.Management has determined that an average of 8 days elapses between the time customers mail their payments and when the funds are available to the firm.The cost of reducing the float 3 days will be $60,000.Should Lone Star work to reduce the float if the increase in cash can be invested to earn 7.5% per annum?
A) Yes, savings of $9,041
B) Yes, savings of $147,123
C) Yes, savings of $78,080
D) No, loss of $18,080
Correct Answer:
Verified
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