Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 19, Problem 5QP
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Your firm has an average receipt size of $65. A bank has approached you concerning a
lockbox service that will decrease your total collection time by 2 days. You typically
receive 8,700 checks per day. The daily interest rate is 0.016 percent.
If the bank charges a fee of $190 per day, what is the NPV of the lockbox project?
NPV
What would the net annual savings be if the service were adopted?
Net annual savings
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 2 days. You typically receive 8,500 checks per day. The daily interest rate is 0.02 percent.
If the bank charges a fee of $190 per day, what is the NPV of the lockbox project?
What would the net annual savings be if the service were adopted?
6
Chapter 19 Solutions
Fundamentals of Corporate Finance
Ch. 19.1 - What is the transaction motive, and how does it...Ch. 19.1 - What is the cost to the firm of holding excess...Ch. 19.2 - Which would a firm be most interested in reducing,...Ch. 19.2 - Prob. 19.2BCQCh. 19.2 - Prob. 19.2CCQCh. 19.3 - Prob. 19.3ACQCh. 19.3 - Prob. 19.3BCQCh. 19.4 - Prob. 19.4ACQCh. 19.4 - What is a zero-balance account? What is the...Ch. 19.5 - What are some reasons why firms find themselves...
Ch. 19.5 - Prob. 19.5BCQCh. 19.5 - Why are money market preferred stocks an...Ch. 19.A - Prob. 1ACQCh. 19.A - Prob. 2BCQCh. 19.A - Describe how the MillerOrr model works.Ch. 19.A - Changes in Target Cash Balances Indicate the...Ch. 19.A - Using the BAT Model Given the following...Ch. 19.A - Prob. 3QPCh. 19.A - Prob. 4QPCh. 19.A - Determining Optimal Cash Balances The All Day...Ch. 19.A - Prob. 6QPCh. 19.A - Prob. 7QPCh. 19.A - Interpreting MillerOrr Based on the MillerOrr...Ch. 19.A - Prob. 9QPCh. 19.A - Using BAT Rise Against Corporation has determined...Ch. 19 - Prob. 19.1CTFCh. 19 - Prob. 19.2CTFCh. 19 - Prob. 19.3CTFCh. 19 - Prob. 1CRCTCh. 19 - Prob. 2CRCTCh. 19 - Prob. 3CRCTCh. 19 - Prob. 4CRCTCh. 19 - Prob. 5CRCTCh. 19 - Prob. 6CRCTCh. 19 - Collection and Disbursement Floats [LO1] Which...Ch. 19 - Prob. 8CRCTCh. 19 - Prob. 9CRCTCh. 19 - Prob. 10CRCTCh. 19 - Prob. 11CRCTCh. 19 - Prob. 12CRCTCh. 19 - Prob. 13CRCTCh. 19 - Prob. 1QPCh. 19 - Calculating Net Float [LO1] Each business day, on...Ch. 19 - Prob. 3QPCh. 19 - Float and Weighted Average Delay [LO1] Your...Ch. 19 - NPV and Collection Time [LO2] Your firm has an...Ch. 19 - Using Weighted Average Delay [LO1] A mail-order...Ch. 19 - Prob. 7QPCh. 19 - Lockboxes and Collections [LO2] It takes Cookie...Ch. 19 - Prob. 9QPCh. 19 - Prob. 10QPCh. 19 - Prob. 11QPCh. 19 - Calculating Transactions Required [LO2] Cow Chips,...Ch. 19 - Prob. 1MCh. 19 - Prob. 2MCh. 19 - Prob. 3M
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- I need the answer to 5.23 and 5.28.arrow_forwardLockbox system Eagle Industries feels that a lockbox system can shorten its accounts receivable collection period by 2 days Credit sales are $3,400,000 per year, billed on a continuous basis. The firm has other equally risky investments with a return of 12%. The cost of the lockbox system is $11,000 per year (Note Assume a 365-day year) a. What amount of cash will be made available for other uses under the lockbox system? b. What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system? a. The amount of cash that will be made available for other uses under the lockbox system is $ (Round to the nearest dollar)arrow_forwardD3)arrow_forward
- 2. Suppose you have a bank account into which you make $100 deposits each month. You find a bank account paying r 100% (r is a decimal rate) per month. You would like to save up for a $2,000 car down payment, which you would like to have in 15 months. What must the bank account pay in order for this to be accomplished?arrow_forwardActivity 2: Analyze the given situation. Answer the questions and write your answer on blank space. Suppose you have a P20,000 and you plan to save it for 2 years. Bank IPB offers 7% simple interest rate per year while bank ODB offers 5% compounded quarterly. Which of the two banks offer simple interest? Which one offers compound interest? Which of the two banks will make your savings grow faster? Box for OR code you snouru up-- that she really knows her stuff on this issue. #Vennfferentiate! Directions: Using a Venn diagram, differentiate the three different appeals to support a stand. Do it at the back o page and do not forget to be creative. realme Shot on realme C25arrow_forwardWhich do you prefer: a bank account that pays 10% per year (EAR) for 3 years or a. An account that pays 5.0% every 6 months for 3 years? b. An account that pays 15.0% every 18 months for 3 years? c. An account that pays 1.0% per month for 3 years? a. An account that pays 5.0% every 6 months for 3 years? If you deposit $1 into a bank account that pays 10% per year for 3 years, the amount you will receive after 3 years is $ If you deposit $1 into a bank account that pays 5.0% every 6 months for 3 years, the amount you will receive after 3 years is $ (Select from the drop-down menu.) (Round to five decimal places.) Therefore, you will prefer b. An account that pays 15.0% every 18 months for 3 years? If you deposit $1 into a bank account that pays 15.0% every 18 months for 3 years, the amount you will receive after 3 years is $ Therefore, you will prefer (Select from the drop-down menu.) c. An account that pays 1.0% per month for 3 years? If you deposit $1 into a bank account that pays…arrow_forward
- The right answer should be 1697.92 I just need the solutionarrow_forwardsolve this practice problemarrow_forwardYou just received an offer in the mail to transfer the $5,000 balance from your current credit card, which charges an annual rate of 18.7 percent, to a new credit card charging a rate of 7.9 percent. You plan to make payments of $250 a month on this debt. How many fewer payments will you have to make to pay off this debt if you transfer the balance to the new card? Group of answer choices 2.48 3.10 2.86 2.79 2.64arrow_forward
- Manshukharrow_forwardYou are considering implementing a lockbox system for your firm. The system is expected to reduce the average collection time by 3 days. On an average day, your firm receives 430 checks with an average value of $91 each. The daily interest rate on Treasury bills is 0.015 percent. What is the anticipated amount of the daily savings if this system is implemented?arrow_forward7. You borrow $100,000 for the purchase of an automation system in your company. The payments at 6% is $7,265 per year for 30 years. You decide that you can afford to pay $9,000 every year instead of $7,265. How long will it take to pay off this loan? Do not use excel, please work the problem out, and include cashflow diagram if possible.arrow_forward
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