Slimware Is Considering Establishing a Zero-Balance System for Its Payroll

question 66

Multiple Choice

Slimware is considering establishing a zero-balance system for its payroll account.Currently, the firm pays its hourly employees every week on late Friday afternoon and puts a check for $750,000 in the bank to cover the payroll each Monday morning.Slimware has determined that the checks clear its bank as follows:
$$\begin{array} { l c } \text { Day } & \text { Percent clearing } \\\hline \text { Manday } & 26 \% \\\text { Tuesday } & 51 \% \\\text { Wednesday } & 14 \% \\\text { Thursday } & 7 \% \\\text { Friday } & 2 \%\end{array}$$
What is the annual pretax return to Slimware if the firm can earn 9% on any funds released from employing the zero-balance system? Assume the company has 52 weekly pay periods each year.

• A)$10,374
• B)$199.72
• C)$24,601
• D)$17,488

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