Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lockbox system Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market

image text in transcribed
Lockbox system Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. Despite its broad customer base, HGC has maintained its headquarters in Detroit; and it keeps its central billing system there. On average, it takes 4 days from the time customers mail in payments until HGC can receive, process, and deposit them. HGC would like to set up a lockbox collection system, which it estimates would reduce the time lag from customer mailing to deposit by 2 day-bringing it down to 2 days. HGC receives an average of $1,100,000 in payments per day. How much free cash would HGC generate if it implemented the lockbox system? Round your answer to the nearest cent. $ Would this be a one-time cash flow or a recurring one, assuming the company ceases to grow? How would growth affect your answer? If the firm grows, cash flow If HGC has an opportunity cost of 9%, how much is the lockbox system worth on an annual basis? Round your answer to the nearest cent. $What is the maximum monthly charge HGC should pay for the lockbox system? Round your answer to the nearest cent. $

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_2

Step: 3

blur-text-image_3

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

International Trade Finance

Authors: Tarsem Bhogal, Arun Trivedi

2nd Edition

303024542X, 9783030245429

More Books

Students also viewed these Finance questions

Question

* What is the importance of soil testing in civil engineering?

Answered: 1 week ago

Question

Explain the concept of shear force and bending moment in beams.

Answered: 1 week ago