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Boston Corporation has an arrangement with XYZ Bank in which the bank handles $5 million a day in collections but requires a $420,000 compensating balance. The company is considering withdrawing from the arrangement and dividing its southern region so that two other banks will handle the business instead. Bank S will handle $3 million a day of collections and require a $450,000 compensating balance, and bank T will handle the other $2 million a day and require a compensating balance of $350,000. By dividing the southern region, collections will be accelerated by ½ day. The rate of return is 17 percent. Should the southern region be divided?

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Category:- Basic Finance
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