What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)
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Inc. deals with various clients throughout the city and is
attempting to collect its accounts receivable more efficiently. A major
bank has offered a lock-box system for Bulldogs at a cost of P180,000
per year. Inc. averages 300 receipts daily at an average of P5,000
each. Short-term interest is at 8% annually. What reduction in average
collection time would be needed to justify the lock-box system? (Use a
360-day year)
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- Bulldogs Inc. deals with various clients throughout the city and is attempting to collect its accounts receivable more efficiently. A major bank has offered a lock-box system for Bulldogs at a cost of P180,000 per year. Bulldogs averages 300 receipts daily at an average of P5,000 each. Short-term interest is at 8% annually. What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)No need to type the word "Days" just the number e.g. X.XXBird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 880 $830 $.10 3.2% a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $3,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely…NEKO Inc. deals with various clients throughout the city and is attempting to collect its accounts receivable more efficiently. A major bank has offered a lock-box system for NEKO at a cost of P180,000 per year. NEKO averages 300 receipts daily at an average of P5,000 each. Short-term interest is at 8% annually. What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)
- Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 850 $ 800 $.10 a. NPV b. NPV 3.2% a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $3,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lockbox system. She forecasts that 220 payments a day will be made to lockboxes with an average payment size of $3,300. The bank’s charge for operating the lockboxes is $0.58 a check. Assume an interest rate of 8% and a 365-day year. What reduction in the time to collect and process each check is needed to justify use of the lockbox system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Bulldogs Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Bulldogs is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? P22,985 P25,750 P28,455 P21,875
- Bulldogs Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Bulldogs is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? A. P25,750 B. P21,875 C. P22,985 D. P28,455Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Inc. is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? P28,455P22,985P25,750P21,875Smith Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company's average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Smith is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? A. 22,985 B. 28,455 C. 25,750 D. 21,875
- Knob, Inc., is a nationwide distributor of furniture hardware. The company now uses a central billing system for credit sales of $198.00 million annually. First National, Knob’s principal bank, offers to establish a new concentration banking system for a flat fee of $150,000 per year. The bank estimates that mailing and collection time can be reduced by four days. Assume a 360-day year. By how much will Knob’s cash balances be increased under the new system? (Enter your answer in dollars not in millions.) Assume that the borrowing rate is 12%. How much extra interest income will the new system generate if the extra funds are used to reduce borrowing under Knob’s line of credit with First National? (Enter your answer in dollars not in millions.) Calculate the total annual cost of the old system if collection costs under the old system are $45,000 per year? (Enter your answer in dollars not in millions.)ABC Corporation receives checks from its customers. The total check value averages 700,000 each day. It takes an average of 5 days from deposits for these to clear the bank. If the bank offers to accelerate the 5-day clearing process to 3 days for a monthly fee of 600. If ABC can earn 4% investment income from excess cash, how much is the net annual benefits/cost of this bank offer?Cow Chips, Incorporated, a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast A Philadelphia-area bank will provide this service for an annual fee of $12,000 pald at the end of the year plus 5 cents per transaction. The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year, and there are 365 days per year. If the average customer payment in this region is $5,900, how many customers each day, on average, are needed to make the system profitable for Cow Chips? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Number of customers per day