a)
To compute: The present value of adopting the system.
Introduction:
A lockbox is a distinct post office box that companies use to speed up the collection of accounts receivable. The purpose of the lockbox is to reduce the collection time of accounts receivable.
b)
To compute: The
Introduction:
A lockbox is a distinct post office box that companies use to speed up the collection of accounts receivable. The purpose of the lockbox is to reduce the collection time of accounts receivable.
c)
To compute: The net cash flow per day and per check for adopting the lockbox system.
Introduction:
A lockbox is a distinct post office box that companies use to speed up the collection of accounts receivable. The purpose of the lockbox is to reduce the collection time of accounts receivable.
Want to see the full answer?
Check out a sample textbook solutionChapter 19 Solutions
Fundamentals of Corporate Finance
- QUESTION 1 Agro Tech Corporation is considering investing in a new IT system for selling to its clients. The company has identified two new possible systems, which would be suitable for its customers. Only one of the systems can be selected and the directors are looking for guidance on which system would be the best. The company requires a 15% rate of return on projects of this nature. The installation cost per project will be R100 000 each, while systems can be disposed for R200 000 each after five- years life span. Cash flows for Agro Tech Corporation: IT System (Rands) PERIOD 1 2 3 4 5 SYSTEM A -4 000 000 R1 800 000 R1 700 000 R1 600 000 R1 500 000 R1 400 000 SYSTEM B -3 500 000 1 500 000 1 500 000 1 500 000 1 400 000 R1 300 000 Required: 1.1 Determine the payback period in years, months and days for both systems 1.2 Based on your calculations in 1.1, which system should Agro Tech Corporation consider? Why? 1.3 Calculate the Net Present Value for both systems. 1.4 Calculate the…arrow_forwardQUESTION 2 Determine which of the following two alternatives is the most efficient and which is the most profitable using the Internal Rate of Return (IRR) method: Alter. Purchase Cost $ Annual Savings Life (yrs) (Reduced Pollution fees $lyr) A 1,000,000 $355,000 8 В 3,000,000 $575,000 16 The MARR is 10% per year. Attach File Browse Local Filesarrow_forwardYou received no credit for this question in the previous attempt. Problem 10-28 Equivalent Annual Cost [LO4] Light emitting diodes (LED) light bulbs have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.48 and lasts 1,000 hours. A 15-watt LED, which provides the same light, costs $3.55 and lasts for 12,000 hours. A kilowatt-hour of electricity costs $.124. A kilowatt-hour is 1,000 watts for 1 hour. If you require a return of 10 percent and use a light fixture 500 hours per year, what is the equivalent annual cost of each light bulb? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 60-watt incandescent light bulb LED light bulb $ $ 6.18 4.87arrow_forward
- 问题16 A university system enrolling hundreds of thousands of students is considering a change in the way students pay for their education Currently. the students pay S4oo per credit hour. The university system administrators are contemplating charging each student a set fee of S7.000 per quarter, regardless of how many credit hours each takes. To see if this proposal would be economically feasible, the administrators would Like to know how many credit hours, on average, each student takes per quarter. A random sample of 250 students ylelds a mean of 141 credit hours per quarter and a standard deviation of 23 credit hours per quarter. Suppose the administration wanted to estimate the mean to within o.1 hours at 95% reliability and assumed that the sample standard deviation provided a good estimate for the population standard deviation. How large a total sample would they need to take? O aln 1844 O bin- 2033 Ocin-2031 geס2 - Odnarrow_forward(IRR with uneven cash flows) The Tiffin Barker Corporation is considering introducing a new currency verifier that has the ability to identify counterfeit dollar bills. The required rate of return on this project is 12 percent. What is the IRR on this project if it is expected to produce the following free cash flows: E ? The IRR on this project is %. (Round to two decimal places) Data table (Click on the following icon in order to copy its contents into a spreadsheet) Initial outlay - $1,088,524 FCF in year 1 240,000 FCF in year 2 360,000 FCF in year 3 360,000 FCF in year 4 240,000 FCF in year 5 240,000 FCF in year 6 140,000arrow_forwardP15–13 LOCKBOX SYSTEM Eagle Industries believes that a lockbox system can shorten its accounts receivable collection period by 3 days. Credit sales are $3,240,000 per year, billed on a continuous basis. The firm has other equally risky investments that earn a return of 15%. The cost of the lockbox system is $9,000 per year. (Note: Assume a 365-day year.) What amount of cash will be made available for other uses under the lockbox system? What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system?arrow_forward
- 3. Answer the following questions based on the information below Current credit policy(n/a) Proposed credit policy (net 30) Price (RO) 10 12 Variable cost per unit (RO) Quantity 100,000 150,000 Monthly rate 2% What is the incremental cash flows from switching credit policies? a. b. What is the cost of switching? C. What is your recommendation? d. Assume that the variable cost and the price per unit remain constant, what is the break- even sales increase? Interpret.arrow_forward1 Solve the following rate of return problems. a. An investment of $1,700 today returns $64,000 in 50 years. What is the internal rate of return on this investment? b. An investment costs $850,000 today and promises a single payment of $12.9 million in 22 years. What is the promised rate of return, IRR, on this investment? c. What return do you earn if you pay $24,410 for a stream of $4,000 payments lasting 10 years? Note: Round your answers to 2 decimal places. a. IRR b. IRR c. IRR 7.53 % %arrow_forward2. Calculating Payback [LO2] An investment project provides cash inflows of $745 per year for eight years. What is the project payback period if the initial cost is $1,700? What if the initial cost is $3,30o? What if it is $6,100?arrow_forward
- 5000 4000 D. 3000 2000 1000 5 3 Year 4 C. Find the PV of $1,000 due in 6 years if the discount rate is 12%. Round your answer to the nearest cent. d. A security has a cost of $1,000 and will return $2,000 after 6 years. What rate of return does the security provide? Round your answer to two decimal places. % e. Suppose California's population is 34.3 million people, and its population is expected to grow by 3% annually. How long will it take for the population to double? Round y to the nearest whole number. years f. Find the PV of an ordinary annuity that pays $1,000 each of the next 6 years if the interest rate is 18%. Then find the FV of that same annuity. Round your answers to the cent. PV of ordinary annuity: $ FV of ordinary annuity: $ g. How will the PV and FV of the annuity in part f change if it is an annuity due rather than an ordinary annuity? Round your answers to the nearest cent. Back MacBook Air 80 DII 000 DD FI F2 F3 F4 F6 F7 F9 F10 @ 23 2 3 4 5 6 8 Q W E R Y A S F H J K…arrow_forwardProblem 19-07 Value of Lockboxes [LO2] Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following: Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Daily interest rate on money market securities a. The total collection time will be reduced by three days if the lockbox system is adopted. a. What is the PV of adopting the system? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.) b. What is the NPV of adopting the system? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.) c. What is the net cash flow per day from adopting the lockbox system? Per check? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. C. 405 $995 $.30 PV NPV Net cash flow Net cash flow .068% per day per checkarrow_forward2. An investment has an installed cost of $412,670. The cash flows over the four-year life of the investment are projected to be $212,817, $153,408, $102,389, and $72,308. If the discount rate is zero, what is the NPV? If the discount rate is infinite, what is the NPV? At what discount rate is the NPV just equal to zero? Sketch the NPV profile for this investment based on these three points.arrow_forward
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education