Question: Cow Chips Inc a large fertilizer distributor based in Saskatchewan
Cow Chips Inc., a large fertilizer distributor based in Saskatchewan, is planning to use a lockbox system to speed up collections from its customers on the east coast. A local bank branch will provide this service for an annual fee of $20,000 plus 10 cents per transaction. The estimated reduction in collection and processing time is one day. If the average customer payment in this region is $5,300, how many customers are needed, on average, each day to make the system profitable for Cow Chips? Treasury bills are currently yielding 5 percent per year.
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