Please Answer A and B

As the financial manager for a sporting goods manufacturer, you are responsible for the firm cash management activities, including the cash collection system. Your firm receives 5,000 remit tances per year with an average face value of $10,000. The current collection system consists o customers remitting payments directly to company headquarters. The average mail delay is three days. The typical remittance remains at headquarters for two days. On average, each deposit is available in two days. It costs your firm So.35 to process each check. Your bank is interested in selling you a lockbox system for check collection. Their lockbox system would reduce mail float by two days, processing float by two days, and availability float by one day. The bank charges a variable cost of So.8o per item and an annual fixed cost of S65,000. Assume that the opportunity investment rate is 7 percent. a. Based on these assumptions should you switch to the lockbox system? b. Recent changes in your product market have resulted in higher than expected demand. Thus, your firm's estimate of expected remittances per year is revised upward to 6,000 . Fur ther, the bank has offered to slash the variable cost from So.8o to \$o.60. Based on these revised values, should you switch to the lockbox system