Jennifer Electrical is evaluating whether a lockbox it is currently using is worth keeping. Management estimates that

Question:

Jennifer Electrical is evaluating whether a lockbox it is currently using is worth keeping. Management estimates that the lockbox reduces the mail float by 1.8 days and the processing by half a day. The remittances average $50,000 a day for Jennifer Electrical, with the average check being for $500. The bank charges $0.34 per processed check. Assume that there are 270 business days in a year and that the firm’s for these funds is 6 percent. What will the firm’s savings be from using the lockbox?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...