Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the
Question:
Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following:
The total collection time will be reduced by three days if the lockbox system is adopted.
a. What is the PV of adopting the system?
b. What is the NPV of adopting the system?
c. What is the net cash flow per day from adopting? Per check?
Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Daily interest rate on money market securities 435 $785 $.43 .02%
Step by Step Answer:
a The present value of adopting the system is the number of days collections are reduced times the a...View the full answer
Corporate Finance
ISBN: 978-1259918940
12th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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A money market hedge is a technique used to lock in the value of a foreign currency transaction in a company\'s domestic currency. Therefore, a money market hedge can help a domestic company reduce its exchange rate or currency risk when conducting business transactions with a foreign company.
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