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 3 days. You typically receive 9,500 checks per day. The daily interest rate is 0.019 percent. If the bank charges a fee of $180 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 $60. A bank has approached you concerning a lockbox service that will decrease your total collection time by 3 days. You typically receive 9,500 checks per day. The daily interest rate is 0.019 percent. If the bank charges a fee of $180 per day, what is the NPV of the lockbox project? What would the net annual savings be if the service were adopted?

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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Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 300 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 $0.40 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.) Net Daily Advantage _________________ b. Is it worthwhile to adopt the system? 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.)
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Please provide the steps to solving this problem using a financial calculator: You just opened a brokerage account, depositing $3,500. You expect the account to earn an interest rate of 9.652%. You also plan on depositing $4,500 at the end of years 5 through 10. What will be the value of the account at the end of 20 years, assuming you earn your expected rate of return?

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