Paper Submarine Manufacturing is investigating a lockbox system to reduce its co
ID: 2784736 • Letter: P
Question
Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following:
What is the NPV of adopting the system? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
What is the net cash flow per day from adopting the lockbox system? Per check? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following:
Explanation / Answer
a). Solution :- Present value of adopting the lock-box system = 4 * 410 * 1000
= $ 1640000.
Conclusion :- Present value of adopting the lock-box system = $ 1640000.
b). Solution :- Net present value of adopting the lock-box system = 1640000 - [ (0.40 * 410) / 0.00068 ]
= 1640000 - (164 / 0.00068)
= 1640000 - 241176.47
= $ 1398823.53 (Rounded off to $ 1398824)
Conclusion :- Net present value of adopting the lock-box system = $ 1398824 (approx).
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