Question
6. A company is considering implementing a lockbox system. If the system is implemented, the collection time will be reduced by 2 days. The average
6. A company is considering implementing a lockbox system. If the system is implemented, the collection time will be reduced by 2 days. The average number of payments per day is 868, with an average payment value of $1,124. The lockbox charges a fee per transaction. (That is, the more the number of transactions, the more the total fees.) Assume the company can earn a 2.34% EAR on its cash balances and that there are 365 days in a year. What is the maximum transaction fee the company can pay and still be able to adopt the project with a positive NPV?
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