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PDtax, MBA, CPA
Category: Multiple Problems
Satisfied Customers: 4093
Experience:  Former college tutor and instructor. MBA/CPA, current business consultant/tax pro/writer.
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# Provide detailed descriptions and show all calculations used

### Customer Question

Provide detailed descriptions and show all calculations used to arrive at solutions for the following questions:
1. Community Hospital has annual net patient revenues of \$150 million. At the present time, payments received by the hospital are not deposited for six days 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.
2. St. Luke’s 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?
3. Your firm is considering the following three alternative bank loans for \$1,000,000:
a) 10 percent loan paid at year end with no compensating balance
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 requirement
Assume 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?
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?
Submitted: 8 months ago.
Category: Multiple Problems
Expert:  PDtax replied 8 months ago.
Hi from just answer. I'm PDtax. I can assist.When are these needed?
Customer: replied 8 months ago.
I need this by 3/24 midnight
Expert:  PDtax replied 8 months ago.

I didn't know you needed this by midnight. I just saw this as i was closing for the evening.

I can do this, but will ask for a small \$25 addition to the price to stay late.

I'll wait until 8:30 for you to accept. If I don't hear back, I will opt ouot, and other experts can review your request.

Expert:  PDtax replied 8 months ago.

I'ts past the time I set to work on your project. I'm almost done, so i will finish without the price addition and post answers shortly.

PDtax

Expert:  PDtax replied 8 months ago.

https://app.box.com/s/jj48abq6ncipoe35edo4p5ffva2m0x29 is the link to my solution.

Please accept my work and rate my assistance to close out your request.

PDtax

Expert:  PDtax replied 8 months ago.
I see that you downloaded the file. Please rate my response, as it is how we are credited with assisting customers. I'm PDtax.