Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts
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Question:
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 700 payments a day will be made to lock boxes with an average payment size of $3,500. The banks charge for operating the lock boxes is $.50 a check. The interest rate is .011% 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? | ||
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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 time | days |
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