Question 5 (15 minutes, 15 marks) Treehouse Inc., an Ontario based company has determined that a majority of its customers are in the Maritimes region. It therefore is considering using a lockbox system offered by a bank located in Halifax. The bank has estimated that the use 3 FIN1202 FINAL of the system will reduce collection time from 3 days to 1.5 days. The following information is also available: Average number of payments per day 900 Average value of payment $700 Variable lockbox fee (per transaction) $.15 (15 cents) Annual interest rate on money market Securities 5.5% Annual interest rate on money market Securities 5.5% Required: A. What is the PV of adopting the lockbox system? (5 marks) B. What is the NPV of adopting the lockbox system? (7 marks) C. Based on your calculations should Treehouse Inc. adopt the proposed lockbox system? Why