It takes Cookie Cutter Modular Homes Inc about six days to r

It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter

Solution

reduction in outstanding cash balance = 3*129000 = 387000

_________________________________________________________________________

average daily rate = (1+r)^(1/365)-1 = (1+0.04)^(1/365)-1 = 0.00010746

daily dollar return that could be earned on these savings = 0.00010746*387000 = 41.59

_______________________________________________________________________

convert the annual rate to a monthly rate: (1+r)^(1/12)-1 = (1.04)^(1/12)-1 = 0.00327373978

PV =c/r

c=PV*r

=387000*0.00327373978

=1266.94

_____________________________________________________________________

c = (PV * r) / (1+r)

=(387000* 0.00327373978)/(1+0.00327373978)

=1262.80