Your Cash Manager Is Currently Using Wire Transfer to Obtain

Your cash manager is currently using wire transfer to obtain collections from distant locations each time that the cash accumulates to $50,000.Evaluate the financial logic of this policy if the wire transfer costs $20, saves three days of mail time, and interest rates average 7 percent annually.

A) Stop the policy; $8.77 is lost with each transfer
B) Stop the policy unless the transfer amount is increased to approximately $65,200
C) Continue the policy at the current transfer amount
D) Improve policy by reducing transfer amount to $34,800 break-even wire transfer = 3 days x (7%/365) x $50,000 = $28.77
$28) 77 > $20

Correct Answer:

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