A company receives an average of $100,000 in cheques per day from its customers. It takes the

Question:

A company receives an average of $100,000 in cheques per day from its customers. It takes the company an average of five days to receive and deposit these cheques. The company is considering a lockbox arrangement that would reduce its collection float time by three days, and cost it $50 per month. If its of funds tied up in float is 2 percent, should it adopt the new system?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...