Ch19-2 Your firm has an average receipt size of $145. A bank has approached you
ID: 2653390 • Letter: C
Question
Ch19-2
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. I got the NPV correct which is 235382.35 but I cannot get Net Annual Savings.
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))
What is the NPV of accepting the lockbox agreement? (Round your answer to 2 decimal places. (e.g., 32.16))Explanation / Answer
Answer:
7100 x 145 = 1029500 x 1 = 1029500
PV of costs = 135 x / .00017 = 794117.65
NPV = 1029500 – 794117.65= 235382.35 yes accept the project
Net annual saving = 1029500