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Cross Drugs currently fills mail orders from all over the U.S., and receipts come is to a head office in Little Rock, Arkansas. The firm's average accounts receivable (A/R) is $2.5 million and is financed by a bank loan with 11 percent annual interest. Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent. The annual cost of the system is $15, 000. What is the estimated net annual savings to the firm from implementing the lockbox system? Current A/R = $2, 500, 000. New A/R with 20% reduction: $2, 500, 000 - 0.20($2, 500, 000) = $2, 000, 000 Net reduction in A/R = $ Interest savings = $ (0.11) = $ Net savings = Interest savings - Annual lockbox cost = $ -$ = $40, 000