Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 600 payments a day will be made to lock boxes with an average payment size of $2,000. The bank’s charge for operating the lock boxes is $0.30 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) b. Is it worthwhile to adopt the system? multiple choice
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 600 payments a day will be made to lock boxes with an average payment size of $2,000. The bank’s charge for operating the lock boxes is $0.30 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) b. Is it worthwhile to adopt the system? multiple choice
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
Related questions
Concept explainers
Question
Anne Teak, the
a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.)
b. Is it worthwhile to adopt the system?
multiple choice
-
Yes
-
No
c. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Transcribed Image Text:4
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 600
payments a day will be made to lock boxes with an average payment size of $2,000. The bank's charge for operating the lock boxes is
$0.30 a check. The interest rate is 0.011% per day.
5
points
eBook
B
Hint
Print
a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate
calculations.)
Net daily advantage
b. Is it worthwhile to adopt the system?
O Yes
O No
c. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? (Do not
round intermediate calculations. Round your answer to 2 decimal places.)
Minimum reduction in time
days
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education