Ch19 Your firm has an average receipt size of $145. A bank has approached you co

Question

Ch19

Your firm has an average receipt size of $145. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 7,100 checks per day. The daily interest rate is 0.017 percent. The bank charges a lockbox fee of $135 per day.

What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Receipts Size                         145.00 No of checks received per day                     7,100.00 Total Money which remains inon eday lag(7100*145)             1,029,500.00 Interst rate per day 0.017% Interest Savings per day if lock box service is adopted(1029500*.017%)                         175.02 Lock Box Fees per day                         135.00 Net savings of Lockbox(Benefit - cost)(175-135)                           40.02 Annual Savings(40.02*365)                   14,605.48

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects