The company has a total annual collection of $1,800,000 and a total check releases of $1,500,000

Finance Dec 25, 2020

The company has a total annual collection of $1,800,000 and a total check releases of $1,500,000. The collection normally takes 3 days to make the fund available while it too the suppliers 5 days to withdraw the payment. The fund can be invested with an expected return of 10%. (Assume 360 days). What is the Opportunity cost?

Expert Solution

oppertunity Cost on

recievables $1800000 * 10 % * 3/360 = $1500

on payables $1,500,000 * 10% * 5/360 = $2083.33

total oppertunity cost = $1500 + $2083.33 = $3583.33

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