By the due date assigned solve the following  problem. Norma’s Cat Food of Shell Knob ships cat food throughout the  country. Norma has determined that through the establishment of local  collection centers around the country,


By the due date assigned solve the following  problem. Norma’s Cat Food of Shell Knob ships cat food throughout the  country. Norma has determined that through the establishment of local  collection centers around the country, she can speed up the collection  of payments by two and one-half days. Furthermore, the cash management  department of her bank has indicated to her that she can defer her  payments on her accounts by one-half day without affecting suppliers.  The bank has a remote disbursement center in Iowa.

  1. If the company has $5 million per day in collections and $3 million  per day in disbursements, how many dollars will the cash management  system free up?  Justify your answers.
  2. If the company can earn 8 percent per annum on freed-up funds, how much will the income be? Justify your answers.
  3. If the annual cost of the new system is $800,000, should it be implemented? Explain why or why not.

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