Birds Eye Treehouses. Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. Therefore, it is considering using a lockbox system offer by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days.

Average number of payments per day $830

Average value of payment $780

Variable lockbox fee (per transaction) $.15

Annual interest rate on money market securities 5.0%

a. What is the NPV of the new lock system?

b. Suppose in addition to the variable chare that there is an annual fixed charge of $5,000 to be paid at the end of each year. What is the NPV now?