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Problem 2 7 - 1 1 Lockboxes and Collection Time Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers
Problem Lockboxes and Collection Time
Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. Therefore, it is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by days.
Average number of payments per day
Average value of payment $
Variable lockbox fee per transaction $
Effective annual rate on money market securities
a What is the NPV of the new lockbox system? Do not round intermediate calculations and round your answer to decimal places, eg
b
Suppose in addition to the variable charge that there is an annual fixed charge of $ to be paid at the end of each year. What is the NPV now? A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to decimal places, eg
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