Murkywater Company is considering a lockbox system. Its collection delay is currently 12 days.

Reduction in mailing time = 1.5 day

Reduction in clearing time = 1.5 day

Reduction in firm processing time = 1.0 day

Total = 4.0 days

The following is also known:

Daily interest on Treasury bills = 0.025%

Average number of daily payments to lockboxes = 4,000

Average size of payment = $400

A local bank has agreed to operate this lockbox system for a fee of $0.25 per check processed. What are the costs associated with the proposal?

$4,000,000

$3,000,000

$6,000,000

$5,000,000

$2,000,000