ABC Company has a number of customers in the province who usually pay on time but because
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Question:
ABC Company has a number of customers in the province who usually pay on time but because of the mailing time, processing time and clearing time, cash cannot be obtained as payment is made.
A bank has offered to provide the company with a lockbox system at a fixed fee of Php800 per month and a variable fee of Php6 for each payment processed by the bank.
The Company believes it would benefit from this system since it receives an average of 80 payments a day, each averaging Php5,000. With the lockbox system, the company's collection float will decrease by 8 days. Money market securities earn 6% per year.
- Determine the net annual benefit if the lockbox system is used?
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
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