All Calculations Used to Arrive at Solutions Essay

1. Community Hospital has y first net patient revenues of $ one hundred fifty million. At the present time, allowances received by the hospital atomic number 18 non deposited for six days on average. The hospital is exploring a deposit box line of battle that promises to cut the six days to one day. If these funds released by the safe-deposit positioning can be identifyed at 8 per centum, what will the yearly savings be? Assume the bank tiptoe will be $2,000 per month.2. St. Lukes Convalescent Center has $200,000 in surplus funds that it wishes to invest in marketable securities. If transaction cost to buy and sell the securities are $2,200 and the securities will be held for ternary months, what compulsory annual yield essential be earned before the investing makes economic sense?3. Your hard is considering the following three alternative bank contributes for $1,000,000a) 10 partage giveword paid at year end with no compensating correspondence b) 9 percent loan paid at year end with a 20 percent compensating balance c) 6 percent loan that is discounted with a 20 percent compensating balance requirementAssume that you would normally non carry any bank balance that would meet the 20 percent compensating balance requirement. What is the appreciate of annual chase on each loan?4. An important source of temporary notes is trade credit, which does not actually bring in cash, but instead slows its outflow. Vendors often provide discounts for early payment. What is the formula to determine the effective fire put if the discount is not utilised?1. Community Hospital has annual net patient revenues of $ one hundred fifty million. At the present time, payments received by the hospital are not deposited for sixdays on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to one day. If these funds released by the lockbox arrangement can be invested at 8 percent, what will the annual savings be? Assume the bank fee will be $2,000 per month. yearbook net patient revenue = $150 million safety deposit box arrangement will earn interest for 5 days(As payment received by the hospital are not deposited for 6 days. fix box arrangement will cut the 6 days to 1 day). Interest rate = 8%Bank fee = $2,000 per monthSo, interest earned = $150 million *(5/365)*8% = $164,384Annual bank fee = $2000*12 = $24,000Hence, annual savings = $164,384 $24,000 = $140,3842. St. Lukes Convalescent Center has $200,000 in surplus funds that it wishes to invest in marketable securities. If transaction costs to buy and sell the securities are $2,200 and the securities will be held for three months, what required annual yield must be earned before the investment makes economic sense? Surplus fund = $200,000Transaction cost = $2,200 guardianship period = 3 monthsSo, yield should be stripped $2,200.Let minimum required annual yield = r%So, $200,000*(3/12)*r% = $2,20050,000*r% = 2,200r% = 2,200/50,000 = 4.40%Thus, mi nimum required annual yield = 4.40%3. Your firm is considering the following three alternative bank loans for $1,000,000Assume that you would normally not carry any bank balance that would meet the 20 percent compensating balance requirement. What is the rate of annual interest on each loan? a) 10 percent loan paid at year end with no compensating balance Annual interest rate = 10%b) 9 percent loan paid at year end with a 20 percent compensating balance Annual interest rate = 9%/(1-20%) = 11.25%c) 6 percent loan that is discounted with a 20 percent compensating balance requirement Annual interest rate = 6%/(1-6%)*(1-20%) = 7.98%4. An important source of temporary cash is trade credit, which does not actually bring in cash, but instead slows its outflow. Vendors often provide discounts for early payment. What is the formula to determine the effective interest rate if the discount is not utilized? Effective interest rate if discount is not utilized = give the axe %/(1-Discount %) x (3 60/(Full allowed payment days Discount days)) Example Let credit term is 2/10, n/30Then effective interest rate if discount is not utilized =2%/(1-2%)*(360/(30-10)) = 36.73%