Assume that (1) a lockbox system could be employed which would reduce the cash conversion procedure to 2 1/2 days and (2) the firm could invest any additional cash generated at 6% after taxes. The lockbox system would be a good buy if it costs $25,000 annually.

Q: a. Paradise Retailers, Inc. (PRI) determined that $1,500,000 is needed for cash transactions made…

A: Total cash needed (T) = $1,500,000Fixed charges (F) = $12.95Interest rate (I) = 4.5%

Q: The firm's average accounts receivable balance is P2.5 million, and they are financed by a bank loan…

A: In finance the lockbox system is a service that many banks provide. It is related to receipt of…

Q: You are considering implementing a lockbox system for your firm. The system is expected to reduce…

A: One financial tool used by businesses to expedite payment collecting and processing is the lockbox…

Q: A firm has steady inflows and periodic outflows and wants to use the Beranek model to manage its…

A: Beranek model : It is based upon the assumption that   cash inflows are greater than cash outflows ,…

Q: Sheila’s Society Clothing Manufacturer has collection centres around the country to speed up cash…

A: To calculate the amount of freed-up funds due to the changes in collection and disbursement times,…

Q: Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its…

A: Net present value (NPV) is a financial metric used to assess the profitability of an investment. It…

Q: Zimmer Inc. typically receives 850 checks everyday and the average size of check is $700. The…

A: Number of checks received every day$850Average size of checks$700Cost per check$0.20Collection time…

Q: Community Financial provides lockbox services. They estimate that your firm can reduce its average…

A:

Q: Simon Corporation has daily cash receipts of $70,000. A recent analysis of its collections indicated…

A: The collection float is the time taken to collect the receivables. It is created when the firm…

Q: arm Insurance has collection centers across the country to speed up collections. The company also…

A: Collection period is the period required to recover the pending amount with customers and collect…

Q: Wyatt Widgets has an expected cash flow of $4,500,000 and the standard deviation of the cash flow is…

A: Here's a breakdown of the key concepts involved:Liquidity Risk: This refers to the risk of a company…

Q: Marketable securities yield 1% per month. Determine the size and number of transfers that will…

A: Size and number of transfers that will minimize the cost of maintaining the special account 7…

Q: Whitmer Inc. sells to customers all over the U.S., and all receipts come in to its headquarters in…

A: Lockbox System - It is a technique of management of mailing float. There are certain advantage of…

Q: Comparing Cash Flow Streams: You’ve just joined the investment banking fi rm of Dewey, Cheatum, and…

A: SOLUTION- GIVEN THAT, INTEREST RATE = 10% PER ANNUM COMPOUNDED MONTHLY = 0.83% PER MONTH ( 10% /12)…

Q: Dome Metals has credit sales of $468,000 yearly with credit terms of net 60 days, which is also the…

A: Firm often make strategies to collect account receivables outstanding balance at an early point of…

Q: Knob, Inc., is a nationwide distributor of furniture hardware. The company now uses a central…

A: As per the given information: Credit sales - $198.00 million Flat fee of First National - $150,000…

Q: It takes Cookie Cutter Modular Homes, Incorporated, about six days to receive and deposit checks…

A: Number of days it takes to recieve and deposit checks - 6 Number of days it is expected to be…

Q: Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box…

A: A lockbox system is used when a company has high collection float  and the funds are locked up. The…

Q: "You have recently been hired to improve the performance of Multiplex Corporation which has been…

A: To calculate the cash conversion cycle for Multiplex Corporation, we need to find the number of days…

Q: What would be the net daily benefit of opening the new account? (

A: Net daily benefit refers to the total benefit earned by the company or person in a period of 24…

Q: ntonio is an analyst at Barrilla Group. The firm turns over its inventory 5 times each year. It has…

A: Cash conversion cycle tells that how much period is required to collect money from customer and…

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.