It usually takes Kwarta Corporation 8 calendar days to receive and deposit customer remittances. Kwarta is considering adopting a lockbox system and anticipates that the system will reduce the float time to 5 days. Average daily cash receipts are P220,000. The rate of return is 10 percent.

Required:

a. How much is the reduction of float in cash balances associated with implementing the system?

b. What is the amount return associated with the earlier receipt of funds?

c. If the lockbox costs P7,500 per month to implement, should the system be implemented?

• Yes, savings is P24,000 per year
• Yes, savings is P82,500 per year
• No, loss is P14,500 per year
• No, loss is P24,000 per year

Provide solution.