Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 300 payments a day will be made

Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 300 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 $0.40 a check. The interest rate is 0.011% per day.

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

b. Is it worthwhile to adopt the system?

  • Yes

  • No

c. 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.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Value Investing

Authors: Mike Hartley

1st Edition

979-8864443309

More Books

Students also viewed these Finance questions