Lockbox 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 hasother 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)

Lockbox system is a process of emptying mail payments regularly that were sent by the customers to…

Answered: Lockbox system Eagle Industries feels…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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Problem The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. Using the Baumol model, what level of cash infusion minimizes Sandbox’s costs associated with cash? Use a number, no decimal value no currency, no space, no commas. * 2. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the total costs per month associated its cash infusions? Use a number, no decimal value no currency, no space, no commas * please answer all questions. Thanks!
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.) a. What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system?
Problem The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. If Sandbox gets a cash infusion of P1 million each time it needs cash, how many transactions would be associated with its cash investment? Use a number, no decimal value no currency, no space, no commas * 2. Using the Baumol model, how much would be the Sandbox’s minimum total costs associated with cash infusion? Use a number, no decimal value no currency, no space, no commas. * THIS IS NOT A BARTLEBY ESSAY QUESTIONS. IT INVOLVES COMPUTATIONS, NOT ESSAYS! READ IT AGAIN! DO NOT ASK THIS TO BE REVISED!!!! please answer all questions. Thanks!
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.)
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A large corporate customer approaches your bank for a US$10 million loan at a fixed rate of 6% p.a. over five years to acquire equipment. Interest to be paid annually, principal at maturity. Your bank has adequate USD funding priced at 3 months libor (3ML). Based on the economic recovery and reopening of major economies after the covid-19 vaccines, the bank is concerned about rising interest rate and the USD exchange rate. The proposal is attractive at current rates and the bank is willing to underwrite the loan providing it can hedge the interest rate risk. The bank has a swap party that is interested in receiving 6% and paying 3 months libor plus 2%. A. With the aid of a diagram, show how this USD loan can be hedged using a swap. B. What is the net interest income/year to the bank from the hedge facility in (A) above? What will be the net interest income to the bank on the hedged facility if interest rates(3ML) increase by 200 basis points?
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A company spends on average €75,000 per week to pay its bills and maintains a lower cash balance limit of €40,000. The applicable interest rate is 6.12 percent and the fixed cost of transferring funds is €32. What is the optimal initial cash balance based on the BAT model
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