Mathematics · Aptitude and Business Management

'Nexus Corp.' has adopted a Just-in-Time (JIT) procurement policy. The company's annual purchases are $120 million, and its annual holding costs (excluding financing costs) for raw materials are estimated at $2 million. Under the previous ordering policy, the average raw material inventory was held for 45 days. With the new JIT policy, the average raw material inventory is expected to be maintained at a minimum level equivalent to 5 days of usage, and the number of orders placed annually will increase from 8 to 50. Nexus Corp. finances its working capital with an overdraft facility at an annual interest rate of 8%. Assume a 365-day year. How will the implementation of the JIT policy affect Nexus Corp.'s working capital financing costs and liquidity?