Simon Corporation has daily cash receipts of $56,000. A recent analysis of its collections indicated that customers' payments were in the mail an average of 2.5 days. Once received, the payments are processed in 3 days. After payments are deposited, it takes an average of 1.5 days for these receipts to clear the banking system.

a.How much collection float (in days) does the firm currently have?

b.If the firm's opportunity cost is 12%, would it be economically advisable for the firm to pay an annual fee of $16,300 for a lockbox system to reduce collection float by 4 days?

a.The amount of collection float (in days) the firm currently has is __ days

b. The cost savings if the firm adopts the lockbox system is $________

Would it be economically advisable for the firm to pay an annual fee of $16300 to reduce collection float by 4 days?

The firm (should/ should not) accept the proposal because the savings is (less/greater) than costs