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Question
Jay's Lumber Supplies earns 2.5 percent on its investment in marketable securities. A draft disbursing system has been proposed that will increase disbursement float by 4 days. Purchases next year are expected to total $18 million. Individual payments average $1,000. Use a 365-day year.a. If the draft system is adopted, what amount of funds can the firm expect to release during the year?
b. If each issue draft costs the firm $0.30, should the draft system be adopted?
c. Should the firm consider any other factors?
Answer
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