Suppose that Mail Box, Inc. receives $2,000,000 per day from its customers in the form of checks.
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Suppose that Mail Box, Inc. receives $2,000,000 per day from its customers in the form of checks. It now requires 5 days on average to process the checks. A lock box system will reduce the process time by 2 days (2 days saved) and will cost $330,000. If the firm’s cost of capital is 8%, should they implement the lock box system?
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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