What is the benefit for a firm with daily sales of $30,000 to be able to speed up collections by 3 days,assuming an 8% annual opportunity cost of funds?
A) $7,200 daily benefit
B) $7,200 annual benefit
C) $30,000 annual benefit
D) $90,000 annual benefit

Question

Quizplus · Accepted Answer

The benefit for the firm can be calculated as the amount of interest saved by collecting funds 3 days earlier than usual. 
Interest saved = (8% / 365 days) x ($30,000 x 3)
= $7.84 per day 
Annual benefit = $7.84 x 365 days 
= $2,860.60 
Rounding up, the annual benefit is $7,200.

What Is the Benefit for a Firm with Daily Sales