Zimmer Inc. typically receives 850 checks everyday and the average size of check is $700. The company is nowconsidering using a lockbox system. The lockbox system costs with $0.20 per check. It can reduce the collection time bythree (3) days. What is the NPV of the new lockbox system? Assuming the daily interest rate is 0.035%.Ⓒ$109,286$1,784,830$1.299.286

Number of checks received every day$850Average size of checks$700Cost per check$0.20Collection time…

Zimmer Inc. typically receives 850 checks everyday and the average size of check is $700. The company is now considering using a lockbox system. The lockbox system costs with $0,20 per check. If can reduce the collection time by three (3) days. What is the NPV of the new lockbox system? Assuming the daily interest rate is 0.035%. $109.286 $1,784,830 $1.299.286

Zimmer Inc. typically receives 850 checks everyday and the average size of check is $700. The company is now considering using a lockbox system. The lockbox system costs with $0,20 per check. If can reduce the collection time by three (3) days. What is the NPV of the new lockbox system? Assuming the daily interest rate is 0.035%. $109.286 $1,784,830 $1.299.286

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Your firm has an average receipt size of $65. A bank has approached you concerning a lockbox service that will decrease your total collection time by 2 days. You typically receive 8,700 checks per day. The daily interest rate is 0.016 percent. If the bank charges a fee of $190 per day, what is the NPV of the lockbox project? NPV What would the net annual savings be if the service were adopted? Net annual savings
Sherman’s Sherbet currently takes about 6 days to collect and deposit checks from customers. A lock-box system could reduce this time to 3 days. Collections average $15,000 daily. The interest rate is 0.02% per day. a. By how much will the lock-box system reduce float? b. What is the daily interest savings of the system? c. Suppose the lock-box service is offered for a fixed monthly fee instead of payment per check. What is the maximum monthly fee that Sherman’s should be willing to pay for this service? (Assume a 30-day month.)
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Your firm has an average receipt size of $60. A bank has approached you concerning a lockbox service that will decrease your total collection time by 2 days. You typically receive 8,500 checks per day. The daily interest rate is 0.02 percent. If the bank charges a fee of $190 per day, what is the NPV of the lockbox project? What would the net annual savings be if the service were adopted?
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 5,700 checks per day. The daily interest rate is 0.018 percent. The bank charges a lockbox fee of $115 per day. What is the NPV of accepting the lockbox agreement? (Round your answer to 2 decimal places. (e.g., 32.16)) NPV $ 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)) Net annual savings $.
A firm has daily cash receipts through checks. On average 150 checks are received per day while each check has an averagevalue of P2,500. It takes an average of 3 days for the bank to clear the checks. A bank has offered to decrease the clearingperiod to one day for a monthly fee of P500. The bank gives an interest rate of 3% per year. 1. How much is the decrease of the clearing float in days? 2. How much is the annual cost of the service? 3. What is the annual net benefit or (loss) from having this service?
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A firm has daily cash receipts through checks. On average 150 checks are received per day while each check has an average value of P2,500. It takes an average of 3 days for the bank to clear the checks. A bank has offered to decrease the clearing period to one day for a monthly fee of P500. The bank gives an interest rate of 3% per year. How much would ABC receive as total annual interest on the freed cash? How much is the annual cost of the service? What is the annual net benefit or (loss) from having this service?
Your firm has an average receipt size of $135. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 7, 300 checks per day. The daily interest rate is .016 percent. The bank charges a lockbox fee of $125 per day, a. 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.) b. 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.)

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