Amount of float and the cost of float
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A company receives an average of $11,000 in checks per day. The delay in clearing is typically four days. The current interest rate is .016 percent per day.
a. What is the company's float?
b. What is the most they should be wiling to pay today to eliminate its float entirely?
c. What is the highest daily fee the company should be willing to pay to eliminate its float entirely?
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The solution explains how to calculate the amount of float and the cost of float.
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a. What is the company's float?
Total float= average daily receipts X average delay = 11,000X4 = $44,000
b. ...
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