Question: 22. Davis Corp. is considering establishing a lockbox system. The bank will charge $30,000 annually for the service, which will save the firm approximately $15,000

22. Davis Corp. is considering establishing a lockbox system.

The bank will charge $30,000 annually for the service, which will save the firm approximately $15,000 in processing costs. The lockbox system will reduce the float for cash receipts by 2 days. Assuming that the average daily cash receipts are equal to $400,000, and short-term interest costs are 4%, calculate the benefit or loss from adopting the lockbox system.

a. $30,000 loss.

b. $15,000 loss.

c. $12,000 benefit.

d. $17,000 benefit.

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