Instruction: Answer the following questions. Use separate sheets of paper to support your answer.

1. It takes Trizia Corporation about 12 days to receive and deposit payments from customers. A lockbox system
costing P175,000.00 is being considered. It is expected that the system will reduce the float time by 5 days.
Average daily collections are P425,000.00. The rate of return is 9%.

What is the net advantage or disadvantage of the lockbox system?

Answer: _______________________

2. A large Bulacan firm has annual cash disbursements of P360 million made continuously over the year. Although
the annual service and administrative costs will increase by P100,000, the firm is considering writing all
disbursement checks on a small bank in Pangasinan. The firm estimates that this will allow an additional 1.5 days
of cash usage. If the firm earns on other equally risky investment of 12%, determine the net advantage or
disadvantage of using this technique of cash disbursement.

Answer: _______________________

3. Acme Company likes to optimize all possible actions that it will undertake before making a decision. The owner of
the company is not so knowledgeable when it comes to finance since his expertise is more on marketing. For this
reason, he decided to hire Mr. Cruz as finance manager. The initial task given to Mr. Cruz is to make a decision if
the company will avail of the cash discount given by its supplier. The information given to Mr. Cruz are as follows:

A. Credit term of 2/10, n/60

B. Borrowing rate of 15%

Based on the study, what should be Mr. Cruz’s Recommendation?

Answer: ______________________
 4. The following data are given on FLT Corp.:

Cost of sales per annum P2,200,000

Operating expenses (including dep. Expenses) 800,000

The company books further reveal that FLT was able to sell an equipment amounting to P250,000.00 with gain of
P50,000.00. The asset was acquired at P650,000.00 five years ago.

How much should the corporation’s minimum cash balance be if it is to be equal to 15 days’ requirement?

Answer: _____________________

5. Chloe Timbang predicts a cash requirement of P25,000 over a 1-month period in which cash is expected to be paid
constantly. The opportunity interest rate is 12% per annum. The transaction cost associated with each borrowing
or withdrawal is P10.

a. What is the optimal transaction size?

Answer: ___________________

b. Since it is known how much cash is usually available to meet operating needs, what is the average cash balance?
Answer: __________________