Final answer:
The question revolves around determining the necessary return on a short-term investment to justify the expenses of a wire transfer over an ACH transfer in a business setting, focusing on ROI, opportunity cost, and exchange rates.
Step-by-step explanation:
The subject of this question is evaluating short-term investments and understanding the necessary earnings to justify different money transfer methods in business finance. A company that is a net investor in the short-term must determine the appropriate return on a short-term investment to justify the cost of a wire transfer compared to an Automated Clearing House (ACH) transfer. Considering wire transfers have fees associated with them, the company must earn enough to cover this expense and still benefit financially from transferring funds on a Friday rather than using an ACH transfer. It requires an analysis of the cost versus the potential return on investment (ROI) to determine if the wire transfer fee is justified by the potential earnings from the investment over the same period.
For example, suppose a wire transfer fee is $20 for a $1,000 transfer. The company needs to earn more than $20 on the short-term investment over the weekend to make wiring funds more beneficial than using a fee-less or lower-fee ACH transfer. If the investment opportunity offers a higher ROI than the wire transfer cost plus the opportunity cost of not earning interest during the time the funds would have otherwise been in the investment, then it would be worthwhile to go ahead with the wire transfer. The decision also takes into account other factors like exchange rates and the cost of financial capital.