Your firm has an average receipt size of $155. A bank has approached you concern
ID: 2707477 • Letter: Y
Question
Your firm has an average receipt size of $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 5,700 checks per day. The daily interest rate is 0.018 percent. The bank charges a lockbox fee of $115 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
Your firm has an average receipt size of $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 5,700 checks per day. The daily interest rate is 0.018 percent. The bank charges a lockbox fee of $115 per day.
Total Amount collected = 5700 x 155 = 883500
PV of costs = 115 + (883500 / 1.00018) = 883456
NPV = 883500
What is the NPV of accepting the lockbox agreement? (Round your answer to 2 decimal places. (e.g., 32.16))Total Amount collected = 5700 x 155 = 883500
PV of costs = 115 + (883500 / 1.00018) = 883456
NPV = 883500
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