Sherman's Sherbet currently takes about 6 days to collect and deposit checks from customers. A lock-box system
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Sherman's Sherbet currently takes about 6 days to collect and deposit checks from customers. A lock-box system could reduce this time to 4 days. Collections average $15,000 daily. The interest rate is .02% per day.
a. By how much will the lock-box system reduce float?
b. What is the daily interest savings of the system?
c. Suppose the lock-box service is offered for a fixed monthly fee instead of payment per check. What is the maximum monthly fee that Sherman's should be willing to pay for this service? (Assume a 30-day month.)
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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