Answer and Explanation:
Given:
Average amount of checks per day = $20,000
Delay days = 3 days
Interest rate = 0.017% = 0.00017
(A) Company's float = Average amount of checks per day × Delay days
Company's float = $20,000 × 3 days
Company's float = $60,000
(B) Most Purple Feet should be willing to pay today to eliminate its float entirely = Company's float × Interest rate
Most Purple Feet should be willing to pay today to eliminate its float entirely = $60,000 × 0.00017
Most Purple Feet should be willing to pay today to eliminate its float entirely = 10.2