Cleveland Masks and Costumes Inc. (CMC) has a majority of its customers located in the states...
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Cleveland Masks and Costumes Inc. (CMC) has a majority of its customers located in the states of California and Nevada. Keystone National Bank, a major west coast bank, has agreed to provide a lockbox system to CMC at a fixed fee of $50,000 per year and a variable fee of $0.50 for each payment processed by the bank. On average, CMC receives 50 payments per day, each averaging $20,000. With the lockbox system, the company's collection float will decrease by 2 days. The annual interest rate on money market securities is 6%. If CMC makes use of the lockbox system, what would be the net benefit to the company? Use 365 days per year. (E*) Cleveland Masks and Costumes Inc. (CMC) has a majority of its customers located in the states of California and Nevada. Keystone National Bank, a major west coast bank, has agreed to provide a lockbox system to CMC at a fixed fee of $50,000 per year and a variable fee of $0.50 for each payment processed by the bank. On average, CMC receives 50 payments per day, each averaging $20,000. With the lockbox system, the company's collection float will decrease by 2 days. The annual interest rate on money market securities is 6%. If CMC makes use of the lockbox system, what would be the net benefit to the company? Use 365 days per year. (E*)
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SOLUTION To calculate the net benefit to Cleveland Masks and Costumes Inc CMC from utilizing the lockbox system we need to consider the reduction in c... View the full answer
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