Your firm has an average receipt size of $155. A bank has approached you concern
ID: 2624296 • Letter: Y
Question
Your firm has an average receipt size of $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 6,700 checks per day. The daily interest rate is 0.016 percent. The bank charges a lockbox fee of $120 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 $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 6,700 checks per day. The daily interest rate is 0.016 percent. The bank charges a lockbox fee of $120 per day.
Explanation / Answer
1 Avg. receipt size $ 130 2 Checks per day 7200 3 Lockbox fee $ 185 4 Interest rate 0.018% 5 Collection savings on any day $ 151.960 2x(#4 x #2 x #1) - #3 NPV $ 844,222.22 (#5/#4) Net annual savings $ 55,465.40 (#5 x 365)
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