Explore BrainMass

Explore BrainMass

    Zero-balance account

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    14.16 Zero-balance account Union Company is considering establishment of a zerobalance account. The firm currently maintains an average balance of $420,000 in
    its disbursement account. As compensation to the bank for maintaining the zerobalance
    account, the firm will have to pay a monthly fee of $1,000 and maintain a $300,000 nonâ?"interest-earning deposit in the bank. The firm currently has no other deposits in the bank. Evaluate the proposed zero-balance account, and make a recommendation to the firm, assuming that it has a 12% opportunity cost.

    © BrainMass Inc. brainmass.com June 4, 2020, 12:51 am ad1c9bdddf
    https://brainmass.com/business/accounting/364270

    Solution Preview

    In order to decide we compare the cost of two alternatives

    As of now, the firm maintains an average balance of $420,000 and does not earn any interest on it. ...

    Solution Summary

    The solution explains how to evaluate a Zero-balance account

    $2.19

    ADVERTISEMENT