It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutters management is considering a lockbox system to reduce the firms collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are $133,000, and the required rate of return is 5 percent per year. Assume 365 days per year.

a.	What is the reduction in outstanding cash balances as a result of implementing the lockbox system?

Cash balance reduction

$

b.	What is the daily dollar return that could be earned on these savings? (Round your answer to 2 decimal places. (e.g., 32.16))

Dollar return

$

c-1	What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the end of the month? (Round your answer to 2 decimal places. (e.g., 32.16))

Maximum monthly charge

$

c-2	What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the beginning of the month? (Round your answer to 2 decimal places. (e.g., 32.16))

Maximum monthly charge

$

rev: 12_10_2012, 04_17_2013_QC_29407