Cross Collectibles currently fills mail orders from all over the U.S. and receipts come in to headquarters in Little Rock, Arkansas. The firm's average accounts receivable (A/R) is $2.5 million and is financed by a bank loan with 11 percent annual interest. Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent. The annual cost of the system is $15,000. What is the estimated net annual savings to the firm from implementing the lockbox system? a. $500,000 b. $30,000 c. $60,000 d. $55,000 e. $40,000

Whitmer Inc. sells to customers all over the U.S., and all receipts come in to its headquarters in New York City. The firm's average accounts receivable balance is $5.0 million, and they are financed by a bank loan at a 9.50% annual interest rate. The firm is considering setting up a regional lockbox system to speed up collections, and it believes this would reduce receivables by 20%. If the annual cost of the system is $17,000, what pre-tax net annual savings would be realized? a. $78,000 b. $74,600 c. $95,000 d. $112,000 e. $81,400

A bank is considering two alternatives for handling its service calls in the next decade ( treat this as one period). The projected number of service calls is 10,000,000. If the bank sets up its own service call center in the U.S., the fixed cost is estimated to be $2,700,000, and the variable cost is calculated to be 32 cents per call. If the call service is outsourced to a foreign company, the fixed cost would be $240,000, and the unit charge would be 57 cents per call.  (a)What is the break-even number of service calls?  (b)Would the bank set up its own service call center or outsource call handlings? (Enter 1 for Produce or enter O for Outsource)  (C)What would be the dollar amount that the bank can save by choosing the better option? (Cost difference between the two options)

Global Services is considering a promotional campaign that will increase annual credit sales by $590,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows:           Accounts receivable 5 times Inventory 8 times Plant and equipment 4 times        All $590,000 of the sales will be collectible. However, collection costs will be 5 percent of sales, and production and selling costs will be 70 percent of sales. The cost to carry inventory will be 8 percent of inventory. Depreciation expense on plant and equipment will be 20 percent of plant and equipment. The tax rate is 35 percent.a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add the three together.          b. Compute the accounts receivable collection costs and production and selling costs and then add the two figures together. c. Compute the costs of carrying inventory.…

A major credit card company is launching a referral program, which gives an existing customer $50 for each new customer he or she refers to the company. The credit card company estimates that the average annual spending of a customer is $15,000, and the revenue for the credit card company would be 5% of the spending. The estimated marketing and operations costs for the referral program is $500,000 per year. a. Build a spreadsheet model for the credit card company to estimate the annual increase in profit gained from the referral program. If the referral program helps the credit card company acquire 25,000 new customers, what is the annual increase in profit gained from the referral program. Assume all new customers are acquired at the beginning of the year. Profit increase b. It is estimated that 10% of the customers acquired through the referral program would have become customers of the credit card company even without the referral program. How does this information change the…

Global Services is considering a promotional campaign that will increase annual credit sales by $650,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable Inventory Plant and equipment 2 times 4 times 2 times All $650,000 of the sales will be collectible. However, collection costs will be 6 percent of sales, and production and selling costs will be 76 percent of sales. The cost to carry inventory will be 4 percent of inventory. Depreciation expense on plant and equipment will be 10 percent of plant and equipment. The tax rate is 35 percent. a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add the three together. Accounts receivable Inventory Plant and equipment Total Investment

The Milton Company currently purchases an average of $27,000 per day in raw materials on credit terms of "net 40." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $30,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. a. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ b. If Milton stretches its accounts payable an extra 10 days beyond the due date next year, how much additional short-term funds (that is, trade credit) will be generated? $

The Milton Company currently purchases an average of $23,000 per day in raw materials on credit terms of "net 25." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $26,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. a. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ 575,000 b. If Milton stretches its accounts payable an extra 5 days beyond the due date next year, how much additional short- term funds (that is, trade credit) will be generated? $

First National Bank of Conway is considering installing two ATMs in its Southside branch. The new machines are expected to cost $37000 apiece. Installation costs will amount to about $15000 per machine. Each machine has a projected useful life of 10 years. Due to rapid growth in the Southside district, these two machines (combined) are expected to handle 50000 cash transactions per year. On average, each cash transaction is expected to save $0.30 in teller expenses. If First National has a 0.10 cost of capital, what is the NPV of this project?

Beasley Enterprises has an agreement with Downtown Bank whereby the bank handles $1.02 million in collections a day and requires a $750,000 compensating balance. Beasley is contemplating cancelling the agreement and dividing its eastern region so that two other banks would handle its business. Banks A and B would each handle $.51 million of collections per day and each requires a compensating balance of $400,000. Collections should be accelerated by one day if the eastern region is divided. The T-bill rate is 2.97 percent annually. What is the amount of the annual net savings if this plan is adopted?