LOCKBOX ANALYSIS OF ACCOUNTS RECEIVABLE INSTRUCTIONS FOR EVALUATION OF A LOCKBOX SYSTEM: Global Manufacturing is considering...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
LOCKBOX ANALYSIS OF ACCOUNTS RECEIVABLE INSTRUCTIONS FOR EVALUATION OF A LOCKBOX SYSTEM: Global Manufacturing is considering using a lockbox system to speed up collections of accounts receivable from its customers in the new year. 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. HELP: Also see the file named "09-SAMPLE COMPANY LOCKBOX ANALYSIS OF ACCOUNTS RECEIVABLES.pdf" provided to help you setup your spreadsheet for these LOCKBOX calculations. Annual interest rate (T-Bill rate) = Average value of each payment = Average # of payments per day = Annual fixed charge = Lockbox fee per payment =|| Reduction in collection time (# days) =|| DATA INPUTS U. S. Bank Wells Fargo 13.54% $4,215 52 13.54% ALWAYS USE CELL REFERENCES to the correct values on your worksheets to do your calculations. $4,215 52 $8,500 $0.41 $35,700 $0.22 NOTE: Cells shaded in YELLOW are the cells you must provide the calculations or analysis. The questions that the CEO needs you to answer are as follows: (a) What is the Net Present Value (NPV) of each of the new lockbox system proposals (including the annual fixed charge)? (Round to the nearest whole dollar) Similar to Practice Problem 27-11. Part b. U.S Bank= Wells Fargo = $314,312 $580,180 (b) What will be the annual net savings? Assume that the Annual interest rate (T-bill rate) is 13.54 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Similar to Practice Problem 27-10. U.S Bank= Wells Fargo = $0 $0 (c) How many customers are needed, on average each day, to make each of the lockbox systems break-even? (Round to the nearest whole customer) Similar to Practice Problem 27-12. U.S Bank = Wells Fargo = (d) Which is the Preferred Lockbox System for Global Manufacturing, Inc.? 0 0 U.S Bank or Wells Fargo (e) What is the reduction in accounts receivable balance as a result of implementing the Preferred Lockbox System in 2024? (Round to the nearest whole dollar) $0 = Reduction in collection time (Preferred System) X Average value of each payment x Average number of payments per day I Daily Interest Rate U.S. Bank 0.03480% Wells Fargo 0.03480% PV (Cash Inflow) PV (Transaction cost) $ 61,270.59 $ 32,876.90 NPV (without annual fixed charge ######## # PV(Annual fixed charge) $62,776.96 ###### # NPV (With annual fixed charg $ 314,312 $ 580,180 LOCKBOX ANALYSIS OF ACCOUNTS RECEIVABLE INSTRUCTIONS FOR EVALUATION OF A LOCKBOX SYSTEM: Global Manufacturing is considering using a lockbox system to speed up collections of accounts receivable from its customers in the new year. 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. HELP: Also see the file named "09-SAMPLE COMPANY LOCKBOX ANALYSIS OF ACCOUNTS RECEIVABLES.pdf" provided to help you setup your spreadsheet for these LOCKBOX calculations. Annual interest rate (T-Bill rate) = Average value of each payment = Average # of payments per day = Annual fixed charge = Lockbox fee per payment =|| Reduction in collection time (# days) =|| DATA INPUTS U. S. Bank Wells Fargo 13.54% $4,215 52 13.54% ALWAYS USE CELL REFERENCES to the correct values on your worksheets to do your calculations. $4,215 52 $8,500 $0.41 $35,700 $0.22 NOTE: Cells shaded in YELLOW are the cells you must provide the calculations or analysis. The questions that the CEO needs you to answer are as follows: (a) What is the Net Present Value (NPV) of each of the new lockbox system proposals (including the annual fixed charge)? (Round to the nearest whole dollar) Similar to Practice Problem 27-11. Part b. U.S Bank= Wells Fargo = $314,312 $580,180 (b) What will be the annual net savings? Assume that the Annual interest rate (T-bill rate) is 13.54 percent annually. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Similar to Practice Problem 27-10. U.S Bank= Wells Fargo = $0 $0 (c) How many customers are needed, on average each day, to make each of the lockbox systems break-even? (Round to the nearest whole customer) Similar to Practice Problem 27-12. U.S Bank = Wells Fargo = (d) Which is the Preferred Lockbox System for Global Manufacturing, Inc.? 0 0 U.S Bank or Wells Fargo (e) What is the reduction in accounts receivable balance as a result of implementing the Preferred Lockbox System in 2024? (Round to the nearest whole dollar) $0 = Reduction in collection time (Preferred System) X Average value of each payment x Average number of payments per day I Daily Interest Rate U.S. Bank 0.03480% Wells Fargo 0.03480% PV (Cash Inflow) PV (Transaction cost) $ 61,270.59 $ 32,876.90 NPV (without annual fixed charge ######## # PV(Annual fixed charge) $62,776.96 ###### # NPV (With annual fixed charg $ 314,312 $ 580,180
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Identify in which ledger (general or subsidiary) each of the following accounts is shown: 1. Rent Expense 2. Accounts Receivable-Chen 3. Bank Loan Payable 4. Service Revenue 5. Salaries Payable 6....
-
A long, straight wire lies in the plane of a circular coil with a radius of 0.010 m. The wire carries a current of 2.0 A and is placed along a diameter of the coil. (a) What is the net flux through...
-
The parameters of the circuit shown in Figure P6.17 are \(R_{B}=20 \mathrm{k} \Omega\) and \(R_{C}=2.5 \mathrm{k} \Omega\). The transistor parameters are \(\beta=80\) and \(V_{A}=\infty\). Determine...
-
The major difference in ownership structure is that investor-owned firms have welldefined owners, who own stock in the business and exercise control over the firm through the proxy mechanism....
-
The hospital administrator at St. Charles General must appoint head nurses to four newly established departments: urology, cardiology, orthopedics, and obstetrics. In anticipation of this staffing...
-
D 5. Let f : R - R be continuous. Show that (x : f(x) > 0) is an open subset of R and that (x : f(x) = 0) is a closed subset of R
-
Which managerial theory was supported by Boeings decision to overhaul the 737 instead of creating a new plane? Multiple Choice administrative management operations management sustainable management
-
The distance between the driver and driven pulley is 1 5 inches. * Determine the length of the belt if the diameter of the driver and driven pulleys are 3 inches and 6 inches respectively. * What is...
-
You have an account with annual interest rate 6% compounded monthly. You will deposit $120 at the end of each month for 10 years into this account, leave the account untouched for 5 years, and then...
-
The length of the parametric curve 4t 4t x = e cos (7t), y = et sin(7t), t = [2, 3] is L
-
Problem #4: Give and expression for the solid angle, 92, of a square seen from point 0. Problem #5: The surface of the sun has an effective blackbody radiating temperature of 5780 K. 0 h L/2 L/2 L/2...
-
A. What is the intrinsic value of a firm when: Dividend 1= 3, Total equity= 25.75%, and Growth rate is 66% B. If the Current Market Price is $240, Growth Rate 66%, and Dividend $3. What is the...
-
"If an investor holds shares of about 20 different businesses all of the risk is eliminated and the portfolio will give a return equal to the risk-free rate." Discuss the statement.
-
A Alkynes can be made by dehydrohalogenation of vinylic halides in a reaction that is essentially an E2 process. In studying the stereochemistry of this elimination, it was found that...
-
Discuss the difference between a modified audit report and an unmodified audit report.
-
What can impair the objectivity of an audit?
-
What should be included in an engagement letter? What are some reasons a client might change the terms of the engagement? What are the two basic types of engagement proposals?
Study smarter with the SolutionInn App