Qtime Products believes that use of a lockbox system can shorten its accounts receivable collection period by

Question:

Qtime Products believes that use of a lockbox system can shorten its collection period by four days. The firm’s annual sales, all on credit, are $65 million, billed on a continuous basis. The firm can earn 9% on its short-term investments. The cost of the lockbox system is $57,500 per year. Assume a 365-day year.
a. What amount of cash will be made available for other uses under the lockbox system?
b. What net benefit (or cost) will the firm receive if it adopts the lockbox system? Should it adopt the proposed lockbox system?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...