Rocor is considering the implementation of a lockbox collection system for its mid-western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection by time by 3 days. If Tocor could invets any released funds at 10.85 percent, should it use the lockbox system and what would be the savings/loss. Assume 365 days per year.
Rocor is considering the implementation of a lockbox collection system for its mid-western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection by time by 3 days. If Tocor could invets any released funds at 10.85 percent, should it use the lockbox system and what would be the savings/loss. Assume 365 days per year.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...
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Rocor is considering the implementation of a lockbox collection system for its mid-western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection by time by 3 days. If Tocor could invets any released funds at 10.85 percent, should it use the lockbox system and what would be the savings/loss. Assume 365 days per year.
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