Whitmer Inc sells to customers all over the U S , and all receipts come in to its headquarters in New York City The firm 's average accounts receivable balance is $2 5 million, and they are financed by a bank loan at an 11 annual interest rate The firm is considering setting up a regional lockbox s...

Compute annual retax cost savings follow ...

Whitmer Inc. sells to customers all over the U.S., and all receipts come in to its headquarters

Question:

Whitmer Inc. sells to customers all over the U.S., and all receipts come in to its headquarters in New York City. The firm's average balance is $2.5 million, and they are financed by a bank loan at an 11% annual interest rate. The firm is considering setting up a regional lockbox system to speed up collections, and it believes this would reduce receivables by 20%. If the annual cost of the system is $15,000, what pre-tax net annual savings would be realized?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...