r firm processes 50,000 checks each year with an average face value of $50 per check. Collecting on these checks takes 2 days of mail float, 3 days of processing float, and 1 day of availability float. At an opportunity cost rate of 4%, what is the opportunity cost of collection float? What would the opportunity cost of collection float be in you achieved check collection efficiencies that lowered mail float to 1 day, processing float to 2 days, and availability float to 0 days?

r firm processes 50,000 checks each year with an average face value of $50 per check. Collecting on these checks takes 2 days of mail float, 3 days of processing float, and 1 day of availability float. At an opportunity cost rate of 4%, what is the opportunity cost of collection float? What would the opportunity cost of collection float be in you achieved check collection efficiencies that lowered mail float to 1 day, processing float to 2 days, and availability float to 0 days?

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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Pls solve it quickly !! 2. Your firm processes 50,000 checks each year with an average face value of $50 per check. Collecting on these checks takes 2 days of mail float, 3 days of processing float, and 1 day of availability float. At an opportunity cost rate of 4%, what is the opportunity cost of collection float? What would the opportunity cost of collection float be in you achieved check collection efficiencies that lowered mail float to 1 day, processing float to 2 days, and availability float to 0 days?
You 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?
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?
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
Sherman’s Sherbet currently takes about 6 days to collect and deposit checks from customers. A lock-box system could reduce this time to 3 days. Collections average $15,000 daily. The interest rate is 0.02% per day. a. By how much will the lock-box system reduce float? b. What is the daily interest savings of the system? c. Suppose the lock-box service is offered for a fixed monthly fee instead of payment per check. What is the maximum monthly fee that Sherman’s should be willing to pay for this service? (Assume a 30-day month.)
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 600 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 $0.30 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.) b. Is it worthwhile to adopt the system? multiple choice 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.)
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 400 payments a day will be made to lock boxes with an average payment size of $3,000. The bank's charge for operating the lock boxes is $0.50 a check. The interest rate is 0.012% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. Note: Do not round intermediate calculations. b. Is it worthwhile to adopt the system? c. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Net daily advantage b. Is it worthwhile to adopt the system? c. Minimum reduction in time $ Yes (56) 1.39 days
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 700 payments a day will be made to lock boxes with an average payment size of $3,500. The bank’s charge for operating the lock boxes is $0.50 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.) Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 700 payments a day will be made to lock boxes with an average payment size of $3,500. The bank’s charge for operating the lock boxes is $0.50 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.)
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. b. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system.
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.)
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.)
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 800 payments a day will be made to lock boxes with an average payment size of $3,000. The bank’s charge for operating the lock boxes is $0.50 a check. The interest rate is 0.015% 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.) 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.)