Murkywater Company is considering a lockbox system Its collection delay is currently 12 days Reduction in mailing time 1 5 day Reduction in clearing time 1 5 day Reduction in firm processing time 1 0 day Total 4 0 days The following is also known Daily interest on Treasury bills 0 025 Average numbe...

The lockbox technology would cut the collection delay for Murkywater Business by 4 days 15 days for ...

Murkywater Company is considering a lockbox system. Its collection delay is currently 12 days. Reduction in mailing

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Murkywater Company is considering a lockbox system. Its collection delay is currently 12 days.

Reduction in mailing time = 1.5 day
Reduction in clearing time = 1.5 day
Reduction in firm processing time = 1.0 day
Total = 4.0 days

The following is also known:

Daily interest on Treasury bills = 0.025%
Average number of daily payments to lockboxes = 4,000
Average size of payment = $400

A local bank has agreed to operate this lockbox system for a fee of $0.25 per check processed.

What are the costs associated with the proposal?

Related Book For answer-question

Contemporary Financial Management

ISBN: 9780324289114

10th Edition

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

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Posted Date: Apr 08, 2023 05:12 AM

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