3. J-Mart, a nationwide department store chain, processes all its credit sales payment at its suburban Detroit headquarters. The firm is considering the implementation of a lockbox collection system with an Atlanta bank to process monthly payments from its southeastern region. Annual credit sales collections from the region are $60 million. The establishment of the lockbox system would reduce mailing, processing and check-clearing time from 8 days currently to 3.5 days, reduce company processing costs by $25,000 per year, and reduce the compensating balance of its Detroit Bank by 200,000. The Atlanta bank would not charge any fee for the lockbox service but would require j-mart to maintain a $500,000 compensating balance. Funds released by the lockbox arrangement could be invested elsewhere in the firm to earn 15 percent before taxes. Determine the following

a. The amount of funds released by the lockbox arrangement

b. The annual (pretax) earnings on the released funds

c. The annual net (pretax) benefits to j-mart of establishing the lockbox system with the Atlanta bank