Question 2 (15 Points)

Tantom Industries is investigating a lockbox system to reduce its collection time. It has determined the following:

Average number of payments per day	435
Average value of payment	$920
Variable lockbox fee	$0.15
Annual lockbox fee	$2000
Daily interest rate	0.068%

The total collections time will be reduced by 3 days if the lockbox system is implemented.

a. (5 pts) What is the annual benefit of this lockbox system?

b. (5 pts) What is the annual cost of this lockbox system?

c. (5 pts) Should the Tantom Industries implement this proposed lockbox system? Why or why not?