Agatha Concrete Company has been offered by its bank to manage its cash at a cost of $35,000 per year. Under the proposed cash management, the firm can reduce the cash required on hand by $180,000. Since the bank is also doing a lot of record keeping, the firm's administrative cost would decrease by $2,000 per month. What recommendation would you give the firm with respect to the proposed cash management assuming the firm's opportunity cost is 12 percent?

Question

Quizplus · Accepted Answer

The Answer of Agatha Concrete Company has been offered by its bank to manage its cash at a cost of $35,000 per year. Under the proposed cash management, the firm can reduce the cash required on hand by $180,000. Since the bank is also doing a lot of record keeping, the firm's administrative cost would decrease by $2,000 per month. What recommendation would you give the firm with respect to the proposed cash management assuming the firm's opportunity cost is 12 percent?

Agatha Concrete Company Has Been Offered by Its Bank to Manage