What is the amount of the annual net savings

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Reference no: EM131164224

Never Again Enterprises has an agreement with The Worth Bank whereby the bank handles $3.12 million in collections a day and requires a $1,000,000 compensating balance. Never Again is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business.

Banks A and B will each handle $1.56 million of collections a day, and each requires a compensating balance of $1,550,000.

Never Again's financial management expects that collections will be accelerated by one day if the eastern region is divided.

The T-bill rate is 4 percent annually. What is the amount of the annual net savings if this plan is adopted?

Reference no: EM131164224

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