Answer (D) is correct . If cash outflows are $3 million per day, holding cash 2 extra days means that average balances should increase by $6 million. At a 10% interest rate, the additional $6?million would generate interest revenue of $600,000 per year. Thus, if the system can be acquired for $600,000 or less, it would be beneficial to do so.
Answer (A) is incorrect because The amount of $6 million is the increase in cash, not the interest earned on that additional cash.
Answer (B) is incorrect because The amount of $3 million is the amount of daily payments, not the savings.
Answer (C) is incorrect because The daily payments should be multiplied by two, not divided by two.
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