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 0.018 percent. The bank charges a lockbox fee of $185 per day.

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 final answer to 2 decimal places. (e.g., 32.16))

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 0.018 percent. The bank charges a lockbox fee of $185 per day.

Explanation / Answer

6600 x 130*2 = 858000*2

PV of costs = 185/0.018% = 1027777.78

NPV = 858000*2

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