Solution-Which would indicate whether or not johnson should

Which would indicate whether or not johnson should accept

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Reference no: EM132912573

Johnson Corporation has annual sales of $800 million. Management has determined that an average of 9 days elapses between the time customers mail their payments and when the funds are available to the firm. First National Bank has a program whereby the float can be reduced by 5 days. The program would cost Johnson $500,000 in annual fixed fees to the bank, as well as a .05% fee on the annual volume of sales. Johnson will also be required to have a compensating balance of $2,000,000 at First National Bank.

Additionally, Johnson will be able to reduce labor costs in its accounting department by $300,000. Johnson can earn 8 percent (pretax) on its investments.

Problem 1: Show computations which would indicate whether or not Johnson should accept First National Bank's proposal.

Reference no: EM132912573

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Which would indicate whether or not johnson should accept

Reference no: EM132912573

Reference no: EM132912573

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