Question
Problem 17-03 Collections Qtime Products believes that use of a lockbox system can shorten its accounts receivable collection period by four days. The firm's annual
Problem 17-03 Collections
Qtime Products believes that use of a lockbox system can shorten its accounts receivable collection period by four days. The firm's annual sales, all on credit, are $65 million, billed on a continuous basis. The firm can earn 7% on its short-term investments. The cost of the lockbox system is $57,500 per year. Assume a 365-day year.
What amount of cash will be made available for other uses under the lockbox system? Round your answer to the nearest dollar. $
What net benefit (or cost) will the firm receive if it adopts the lockbox system? If the answer is negative, use minus sign. Round your answer to the nearest dollar. $ Should the firm adopt the proposed lockbox system?
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