FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Bird's Eye Treehouses Inc. has determined that a majority of its customers are located in the Winnipeg area. It therefore is
considering using a lockbox system offered by a bank in Manitoba. The bank has estimated that use of the system will reduc
collection time by 1.5 days.
Average number of payments per day
760
Average value of payment
$ 770
Variable lockbox fee (per transaction)
$ 0.10
Annual interest rate on money market securities
4.0%
e-1. What is the NPV of the new lockbox system? (Do not round intermediate calculations. Round the final answer to 2
decimal places. Omit "$" sign in your response.)
NPV
$170558.7
e-2. Should the lockbox project be accepted?
Yes
No
b-1. If there were a fixed charge of $7,000 per year in addition to the variable charge, what is the NPV of the new lockbox
system? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round the final
answer to 2 decimal places. Omit "$" sign in your response.)
NPV
$
b-2. Should the lockbox project be accepted?
O Yes
ONO
D
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Transcribed Image Text:Bird's Eye Treehouses Inc. has determined that a majority of its customers are located in the Winnipeg area. It therefore is considering using a lockbox system offered by a bank in Manitoba. The bank has estimated that use of the system will reduc collection time by 1.5 days. Average number of payments per day 760 Average value of payment $ 770 Variable lockbox fee (per transaction) $ 0.10 Annual interest rate on money market securities 4.0% e-1. What is the NPV of the new lockbox system? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit "$" sign in your response.) NPV $170558.7 e-2. Should the lockbox project be accepted? Yes No b-1. If there were a fixed charge of $7,000 per year in addition to the variable charge, what is the NPV of the new lockbox system? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit "$" sign in your response.) NPV $ b-2. Should the lockbox project be accepted? O Yes ONO D
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