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Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering
Bird's 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. Assume 365 days a year. |
Average number of payments per day | 890 | ||
Average value of payment | $ | 840 | |
Variable lockbox fee (per transaction) | $ | .15 | |
Annual interest rate on money market securities | 4.8 | % | |
What is the NPV of the new lockbox system?
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