Your firm has an average receipt size of $130. A bank has approached you concern

Question

Your firm has an average receipt size of $130. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 6,600 checks per day. The daily interest rate is .018 percent. The bank charges a lockbox fee of $185 per day. What is the NPV of accepting the lockbox agreement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $| 688222.22 What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Average receipt size = $130

No of Checks received per day = 6,600 checks per day

Average collection per day = 130*6,600

= $858,000

..

Net annual Savings if Service is Adopted = 858000*2*0.018%*365

= $112,741.20

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.