11. Cow Chips, Inc., a large fertilizer distributor based in California, is plan

Question

11. Cow Chips, Inc., 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 $20,000 plus 10 percent per transaction. The
estimated reduction in collection and processing time is one day. If the average customer
payment in this region is $5,300, how many customers are needed, on average, each day to make
the system profitable for Cow Chips? Treasury bills are currently yielding 5 percent per year.
A. 87.87
B. 91.15
C. 83.25
D. 81.98

Explanation / Answer

C. 83.25

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