Hammer Industries has an African division that is in startup mode, and so has little excess
cash. Currently, the division maintains an average of only $20,000 in its sole bank account.
Its bank offers a 1.5% earnings credit on retained cash balances, which is $25 per month that
can be offset against account fees. The best alternative is a money market fund that earns 2%,
but which requires the manual transfer of funds several times per month.
Given the minor amount of the balance and the low return on other investment alternatives,
the CFO elects to accept an earnings credit, rather than taking any more aggressive
investment actions.