pay roll account kept under Zero Balance System . calculate pre tax
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:
|
Day
|
Percent clearing
|
|
Monday
|
26%
|
|
Tuesday
|
51%
|
|
Wednesday
|
14%
|
|
Thursday
|
7%
|
|
Friday
|
2%
|
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.