est.cengagenow.com/ilrn/takeAssignment/takeAssignmentMaindo eBook Problem 16-9 L
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est.cengagenow.com/ilrn/takeAssignment/takeAssignmentMaindo eBook Problem 16-9 Lockbox system Hardin -Gehr Corporation (HGC) began oustomers all over the United States. Despite its broad customer base, HGC has maintained its h from the time customers mail in p from customer mailing to deposit by 2 days-bringing it down to 2 days. HGC receives an average of $1,100,000 in payments per day a. How much free cash would HGC generate if it implemented the lockbox system? Round your answer to the nearest cent operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has eadquarters in Detroit; and it keeps its central billing system there. On average, it takes 4 days payments until HGC can receive, process and depost them. HGC would ke to set up a lockbox collection system, which t estimates would reduce the time ag HGC can receive, process, and deposit them. HGC would ike to Would this be a one-time cash flow or a recurring one, assuming th e company ceases to grow? How would growth affect your answer? If the firm grows, cash flow Select b. If HOC has an opportunity cost of g%, how much is the lodbox system worth on an annual basis? Round your answer to the nearest cent. c. What is the maximum monthly charge HGC should pay for the lockbox system? Round your answer to the nearest cent. Check My Work (a remaining) Problem 15.0 ueii 10 orExplanation / Answer
a. Free cashflow = 2 days * $1,100,000 per day
= $2,200,000
This would be a one-time cashflow
b. Worth = $2,200,000 / (1+9%/365)2
= $2,198,916
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