Premium Seed Sales, Inc expects to generate sales of $22,000,000 in the coming year. All sales are done on a
credit basis, net 45 days.
Premium Seed has estimated that it takes an average of three days for payments to
reach their central office and an additional two days to process the payments. What is the opportunity cost of
the funds tied up in the mail and processing? Premium Seed uses a 360-day year in all calculations and can
invest free funds at 6.5%.
Daily collections = $22,000,000/360 = $61,111
Opportunity cost = ($61,111)5.(.
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