Question: A company is evaluating a lockbox system proposal. The average number of payments received by the company per day is 1,500 and the average payment

A company is evaluating a lockbox system proposal. The average number of payments received by the company per day is 1,500 and the average payment amount is $200. The bank proposing the system will charge the company a variable cost of $0.05 per transaction (i.e. payment processed) in addition to a $5,000 annual fee. The bank has estimated that use of the lockbox system will reduce the company's collection time by two days. The annual interest rate is 6%.

(a) Should the proposed lockbox system by accepted?

(b) what is the maximum annual fee the company should pay for this lockbox system?

Please explain with a step-by-step solution including formulas.

Step by Step Solution

★★★★★

3.51 Rating (161 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

To determine whether the proposed lockbox system should be accepted and the maximum annual fee the c... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Let A, B be sets. Define: (a) the Cartesian product (A B) (b) the set of relations R between A and B (c) the identity relation A on the set A [3 marks] Suppose S, T are relations between A and B, and...

Priority reversal can happen when strings of varying needs synchronize on admittance to normal assets - strings of more prominent need might wind up looking out for strings of lesser need, prompting...

Three objects, carrying charges of -4.0 x 10-6 C, -6.0 x 10-6 C, and +9.0 x 10 C, respectively, are placed in a line, equally spaced from left to right by a distance of 0.50 m. Calculate the...

Question 4 Centilux Corporation currently receives all customer payments at its headquarters and then send all those checks to its bank for processing. This policy leads to an 8-day payment...

Centilux Corporation currently receives all customer payments at its headquarters and then send all those checks to its bank for processing. This policy leads to an 8-day payment processing cycle....

Question 4 Centilux Corporation currently receives all customer payments at its headquarters and then send all those checks to its bank for processing. This policy leads to an 8-day payment...

show your work please Centilux Corporation currently receives all customer payments at its headquarters and then send all those checks to its bank for processing. This policy leads to an 8-day...

A company currently receives all customer payments at its headquarters and then send all checks to its bank for processing. This policy leads to a 10-day payment processing cycle. The company is...

Conduct an experiment to compare m-commerce at Wal-Mart and Target. Start the stopwatch, load Wal-Marts site, and search for a Fodors travel guide to Mexico. Add the product to your cart, check out...

(c) Based on the concepts of k-oui of- n redundancy, how do you classify the below redundant system? Noting that: "C" stands for component, "A" stands for active and "P" stands for passive. (6...

John received several types of income in 2 0 2 4 . Which of the following should be included in his gross income? a . Damages received for personal injuries. b . Gifts from his parents. c ....

The vapor pressure of water at various temperatures follows: (a) Draw a scatter diagram of these data. What type of relationship seems appropriate in relating y to x? (b) Fit a simple linear...

An unstable particle is created in the upper atmosphere from a cosmic ray and travels straight down toward the surface of the earth with a speed of 0.99540c relative to the earth. A scientist at rest...

How long does it take light to reach us from the Sun 1.50 x 108 km away?

Two 15-kg cannon balls are chained together and fired horizontally with a velocity of 165 m/s from the top of a 15-m wall. The chain breaks during the flight of the cannon balls and one of them...

Consider the data for the NACA 2412 airfoil given in Fig. 4.5. Calculate the lift and moment about the quarter chord (per unit span) for this airfoil when the angle of attack is 4 and the free stream...

A shaft carries five masses A, B, C, D and E which revolve at the same radius in planes which are equidistant from one another. The magnitude of the masses in planes A, C and D are 50 kg, 40 kg and...

Determine the annual financing cost of a 1-year (365 day), $10,000 discounted bank loan at a stated annual interest rate of 9.5 percent. Assume that no compensating balance is required.

Under what conditions would a firm prefer the following? a. A fixed-rate term loan from a bank b. A floating-rate term loan, with the rate tied to the banks prime rate

Describe the matching approach for meeting the financing needs of a company. What is the primary difficulty in implementing this approach?

iii. asks questions about detailed emotional intelligence (EI) behaviours, rather than business skills or competencies

i. allows you to organise rater groups from your line manager(s), peers, direct reports and, preferably, others

iv. includes verbatim statements from each rater about what they would like you to keep doing, do more of, do less of and start doing.