Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the

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Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following:

Average number of payments per day ................................... 435
Average value of payment ...................................................... $845
Variable lockbox fee (per transaction) ................................... $.15
Daily interest rate on money market securities ................... .068%

The total collection time will be reduced by three days if the lockbox system is adopted.

a. What is the PV of adopting the system?

b. What is the NPV of adopting the system?

c. What is the net cash flow per day from adopting the system? Per check?

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Related Book For  book-img-for-question

Fundamentals Of Corporate Finance

ISBN: 9781265553609

13th Edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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