Coyote Valley Coyote Valley Products Coyote Valley Products has daily cash collections of $500,000. The cash management staff has determined (1) customers' payments are in the mail an average of 3 days; (2) processing after receipt averages 1 day; and (3) after deposit funds are cleared on average in 2 days. Assume a 365 day year. 

What would be the benefit of a lock-box system that reduced mail float by 1.5 days, eliminated processing float, and reduced clearing float by 1 day, if Coyote Valley Products faces a 9% opportunity cost of funds?

Answer rating: 100% (QA)

To calculate the benefit of a lockbox system we need to determine the reduction in float and the ass... View the full answer