[1] [2] [3] [4] [5] [6] [7] [8] Calculation --> [4] + 365 = [5] [5] x [3] = [6] [6] x 10% = [7] |[2] + 5 - [7] = [8] Expense on Float time Annual Daily Increase in Marginal Benefit City Collection Center (LA Center) Receipts Collection Balance Revenue 10% (Revenue - Cost) Los Angeles 7-1 6 $ 18,000,000 $ 49,315.07 S 295,890 29,589 15,589.04 Oakland 7- 2 5 $ 10,000,000 S 27,397.26 136,986 13,699 (301.37) San Diego $ 70,000 7- 2 5 $ 12,000,000 S 32,876.71 S 164,384 16,438 S 2,438.36 Santa Barbara 7-2 5 $ 8,000,000 S 21,917.81 S 109,589 S 10,959 (3,041.10) Pasadena 7-3 4 $ 6,000,000 $ 16,438.36 S 65,753 6,575 S (7,424.66 77,260 7,260 70,000 7,260Receivables Management - Microsoft Word Table Tools Home Insert Page Layout References Mailings Review View Design Layout Cut Georgia Copy 12 - A A 4 AaBbCCDc AaBbCcDo AaBbC AaBbCc AaB AA #Find Paste Format Painter BI U - abe X x' Aat 2 . A 1 Normal 1 No Spaci... Heading 1 Title Change Gac Replace Heading 2 Styles Select Clipboard Font Paragraph Styles Editing (2 1 0. # . . I '. . 1 3 6 . 1 . . . 2 . . . 1/ # . . 3 . . . 1 . . . 4 . . # . . . 5 . . . 1 . # 6 . . . 1 . . .7# . .1 . KASBIT Introduction to Business Finance Exercise # 11 Q6: LOCAL OFFICE COLLECTION SYSTEM VS LOCK BOX SYSTEM The National company (based in new York) has many mail-order customers in California and is losing substantial revenue as a result of the average of seven days between the time customer deposits his payment and the time deposit is credited to National's account in a New York bank. Accordingly, Mr. Jim, collection manager for National Company, is trying to find a way to reduce this float time and has narrowed the solutions to (1) Operating a collection center in Los Angeles or (2) opening a lock box accounts in the major California cities. Mr. Jim estimates that a collection center in Los Angeles (LA) will require an annual expenditure of $70,000. Lock box expenditure and new float time for each city are shown in the following table: City Float time (LA| Lock box Expense Float time for Annual Center lock Box Receipts Los Angeles $ 25:500 $ 18,000,000 Oakland 15,000 10,000,000 San Diego 18,000 12,000,000 Santa Barbara 14,000 8,000,000 Pasadena 9,000 6,000,000 Any receipts are placed in a money market fund returning 10%. Required: a. Find the net marginal benefit of opening the Los Angeles collection center. b. Find the net marginal benefit of opening each lock box. c. What should Mr. Jim do? Page: 6 of 6 | Words: 1,024 3 100% + WE 1:41 PM 5/9/2020Jazz JAZZIWARID all Ill - & 193% 4:57 Assignment 5 ( 1... Q . . . Assignment - 5 Kashan Rabia 15969. a. Find the net marginal benibit of opening the los Angeles collection center. Average daily sale. 1800 000 / 365 - 49315 Ancrease in balance. 6days X 49315 295 890 Marginal Revenue- 295890 x10/. : 29589 . Marginal Cost . (70000 LOSS (40411 ) b. Find the net marginal benefit of opening each lock box . city | Lock box Float Annual Daily Expense time Receipt Collection in balance los Angeles 25 500 7-1- 6 18000000. 49315 295890 Oakland 15000 1-1:6 10 0ooood 21397 164.384 San Diego Santa 18000 3-1=6 12 000000 32817 197260 14000 7-1: 6 8:000000 21918 131507 Pasadena 9000 7-1= 6 60DOOD 164.38 98630 Scanned with CamScanner Marginal Revenue Benifit orloss 10% 29589 16438 25 500 - 29589 = 4089 15000 - 10438 = 1438 13151 18000 - 19726 9863 14001) 9000 - 9863 18 49) 863