McKenzie Inc. is considering the establishment of a lockbox system with its bank. The firm receives daily
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McKenzie Inc. is considering the establishment of a lockbox system with its bank. The firm receives daily remittances of $305,000 and could earn 9% on any funds freed up through faster collections. If the lockbox system can save 3 days in the collection process, and the firm's bankers will charge $52,500 per year to operate the lockbox system. The bank also requires that the company maintain a compensating balance of $75,000. Is it worth it to establish the system?
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