P1415 Lockbox system Eagle Industries believes that a lockbox system can shorten its accounts receivable collection period
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P14–15 Lockbox system Eagle Industries believes that a lockbox system can shorten its accounts receivable collection period by 3 days. Credit sales are $3,240,000 per year, billed on a continuous basis. The firm has other equally risky investments that earn a return of 15%. The cost of the lockbox system is $9,000 per year. (Note: Assume a 365-day year.)
a. What amount of cash will be made available for other uses under the lockbox system?
b. What net benefit (cost) will the firm realize if it adopts the lockbox system?
Should it adopt the proposed lockbox system?
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Related Book For
Principles Of Managerial Finance
ISBN: 9780133546408
7th Edition
Authors: Lawrence J Gitman, Chad J Zutter
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