Corporate Finance Return on Compensating balance

A JB company, which can earn 7% on money market instruments, currently has a lock-box arrangement with Faisal Bank for its southern customers. The bank handles $3,000,000 a day in return for a compensating balance of $2,000,000. · · · a. The company has discovered that it could divide the south region into a southwestern · region (with $1,000,000 a day in collections, which could be handled by a City bank for a $1,000,000 compensating balance) and a southeastern region (with $2 million compensating balance). In each case, collections would be one-half day quicker then with the Faisal bank arrangement. What would be the annual saving (or cost) of dividing the southern region? · In an effort to retain the business the Faisal bank has offered to handle the collections strictly on a fee basis (no compensating balance). What would be the maximum fee the Faisal bank could charge and still retain JB company?