Global Manufacturing is considering using a lockbox system to speed up collections of accounts receivable from its customer in 2020. They have two lockbox proposals to consider: one from U.S. Bank, and one from Well Fargo Bank. The information you will need to evaluate each bank's proposal is presented on this worksheet.

DATA INPUTS
	U. S. Bank	Wells Fargo
Rate on money market investments	3.25%	3.25%
Average Customer payment	$5,470	$5,470
Average number of payments per day	78	78
Annual fee	$9,500	$31,500
Cost per transaction	$0.64	$0.41
Reduction in collection time	2	4

a) What is the net Present Value for each of the new lockbox system proposals (including the annual fixed charge)?

b) How many customers are needed, on average each day, to make each of the lockbox systems break-even?

c) Which is the preferred lockbox system for Global Manufacturing Inc?

d) How much of a reduction in accounts receivable should Global expect from the Preferred Lockbox System if implemented in 2020?

TO CALCULATE THE REDUCTION IN ACCOUNTS RECEIVABLES USE THE REDUCTION IN COLLECTION TIME FOR THE SELECTED LOCKBOX SYSTEM FROM PART "c" USING THIS FORMULA:

= Reduction in collection time x Average customer payment x Average number of payments per day

U. S. Bank	Wells Fargo
a)	a)
b)	b)
c) U.S. Bank (correct)
d) $853,320.00 (Correct)