Chapter 20 Problem 34

34. Lock Boxes. Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 400 payments a day will be made to lock boxes with an average payment size of $2,000. The bank's charge for operating the lock boxes is $.40 a check. The interest rate is .015% per day. (LO20-7) a. If the lock box makes the cash available 2 days earlier, what is the net daily advantage of the system? b. Is it worthwhile to adopt the system? c. What minimum reduction in the time required to collect and process each check is needed to justify use of the lock-box system