Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Birds Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering

Birds Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Based on the following information, should the lockbox system be adopted? Assume 365 days per year. Average number of payments per day 950 Average value of payment $ 725 Variable lockbox fee (per transaction) $ .15 Annual interest rate on money market securities 5.5 % a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $5,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 d

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

Succeeding in Business with Microsoft Excel 2013 A Problem Solving Approach

Authors: Debra Gross, Frank Akaiwa, Karleen Nordquist

1st edition

978-1285099149, 9781285963969, 1285099141, 1285963962, 978-1285715346

More Books

Students also viewed these Finance questions

Question

Perform the indicated multiplications. (c 2 + 3x) 3

Answered: 1 week ago