Question 1
2 / 2 pts

Naruto Company has an agreement with Sasuke in which

the bank handles P3 million in collections a day and
requires a P700,000 compensating balance. Naruto is
thinking of canceling the agreement and dividing its
western region so that two other banks will handle its
business instead. Bank A will handle P1 million a day of
collections, requiring a compensating balance of P300,000,
and bank B will handle the other P2 million a day, asking
for a compensating balance of P500,000. Naruto’s financial
manager anticipates that collections will be accelerated ¼
day if the western region is divided. The company’s rate of
return is 14 percent. How much is the benefit of the
proposal?

Correct!

Correct Answers

91,000 (with margin: 0)

Acceleration in cash receipts P3 million per day x

¼ day       P750,000

Additional compensating balance

required                           100,000

Increased cash
flow                                                                P650,
000

Rate of
return                                                                        
 x 0.14

Net annual
savings                                                                  P
91,000

 
Question 2
2 / 2 pts

You estimate a cash need for P4,000,000 over a 1-month

period where the cash account is expected to be disbursed
at a constant rate. The opportunity interest rate is 6 percent
per annum or 0.5 percent for a 1-month period. The
transaction cost each time you borrow or withdraw is P100.
The optimal cash balance is:

Correct!

Correct Answers

400,000 (with margin: 0)

 
Question 3
2 / 2 pts

It takes Naruto Corporation about 12 days to receive and

deposit payments from customers. Therefore, a lockbox
system is being considered. It is expected that the system
will reduce the float time to 8 days. Average daily
collections are P500,000. The rate of return is 12 percent.

The reduction in outstanding cash balances arising from

implementing the lockbox system is:

Correct!

Correct Answers

2,000,000 (with margin: 0)
 4 days x P500,000 ¼ = P2,000,000
 
Question 4
2 / 2 pts

It takes Naruto Corporation about 12 days to receive and

deposit payments from customers. Therefore, a lockbox
system is being considered. It is expected that the system
will reduce the float time to 8 days. Average daily
collections are P500,000. The rate of return is 12 percent.

The return that could be earned on these funds is:

Correct!

Correct Answers

240,000 (with margin: 0)

P2,000,000 x 0.12 = P240,000

 
Question 5
2 / 2 pts

It takes Naruto Corporation about 12 days to receive and

deposit payments from customers. Therefore, a lockbox
system is being considered. It is expected that the system
will reduce the float time to 8 days. Average daily
collections are P500,000. The rate of return is 12 percent.

The maximum monthly charge the company should pay for

this lockbox arrangement is therefore:
Correct!

Correct Answers

20,000 (with margin: 0)

P2,000,000 x 0.12 = P240,000

P240,000/12 = 20,000

Quiz Score: 10 out of 10
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Last Attempt Details:

Time: 6 minutes
Current 10 out of
Score: 10
8 out of
Kept Score:
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