Question

Homework Answer the following questions. Be sure to show your work. 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 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? 2. 3. Your firm is considering the following three alternative bank loans for $1,000,000: 10 percent loan paid at year end with no compensating balance a. b. 9 percent loan paid at year end with a 20 percent compensating balance 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 c. balance requirement. What is the rate of annual interest on each loan? OCity College 2012 28

analyzeFinancial information using the above an answer the question