Home Assignment Working Capital Management (To Be Submitted on 14 May 2012) 1.

Rehan Traders have an agreement with Faysal Bank in which the bank handles Rs 2.5 Mn in collections a day and requires a Rs 600,000 compensating balance. Rehan Traders is thinking of cancelling the agreement and hire the services ABL and MCB for handle its business instead. ABL will handle Rs 1 Mn a day of collections, requiring a compensating balance of Rs 250,000. MCB will handle the other Rs 1.5Mn a day of collections, asking for a compensating balance of Rs 400,000. Rehan Traders financial manager anticipates that collections will be accelerated by day by this change. The company Rate of Return is 12 percent. Carryout a feasibility study to check the viability of the option. 2. Niazi Enterprize have an agreement with NIB in which the bank handles Rs 4.5 Mn in collections a day and requires a Rs 800,000 compensating balance. Niazi Enterprize is thinking of cancelling the agreement and hire the services of HBL and National Bank for handling its business instead. HBL will handle Rs 2 Mn a day of collections, requiring a compensating balance of Rs 400,000. National Bank will handle the other Rs 2.5Mn a day of collections, asking for a compensating balance of Rs 600,000. Niazi Enterprize financial manager anticipates that collections will be accelerated by 1 day by this change. The company Rate of Return is 15 percent. Carryout a feasibility study to check the viability of the option.

3. Waraich Enterprize have an agreement with Punjab Bank in which the bank handles Rs 5 Mn in collections a day and requires a Rs 900,000 compensating balance. Waraich Enterprize is thinking of cancelling the agreement and hire the services of Faysal and Bolan Banks for handling its business instead. Faysal Bank will handle Rs 2 Mn a day of collections, requiring a compensating balance of Rs 500,000. Bolan Bank will handle the other Rs 3 Mn a day of collections, asking for a compensating balance of Rs 700,000. Waraich Enterprize financial manager anticipates that collections will be accelerated by 2/3 day by this change. The company Rate of Return is 11 percent. Carryout a feasibility study to check the viability of the option.