If a company can implement cash management systems and save three days by reducing remittance time and one day by increasing disbursement time based on $2,000,000 in average daily remittances and $2,500,000 in average daily disbursements and its return on freed-up funds is 10%, what is the maximum that it should spend on the system?
A) $2,000,000
B) $650,000
C) $850,000
D) $1,000,000

Question

Quizplus · Accepted Answer

The company saves 3 days on remittances and 1 day on disbursements, freeing up funds for 4 days. The total funds freed up are (3 days * $2,000,000) + (1 day * $2,500,000) = $8,500,000. With a 10% return, the maximum to spend is 10% of $8,500,000, which is $850,000.

If a Company Can Implement Cash Management Systems and Save