20-4)

Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 600 payments a day will be made to lock boxes with an average payment size of $2,000. The banks charge for operating the lock boxes is $.40 a check. The interest rate is .013% per day.

a-1.If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system.(Do not round intermediate calculations.)

Daily interest saved$

a-2.Is it worthwhile to adopt the system?YesNo

b.What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system?(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Minimum reduction in timedays