Consider the following five different lockbox arrangements: Arrangement Float Reduction, in Days Opportunity Cost per Y ear Annual Collections Bank Fee for Lockbox A 3 10% $1,000,000 $500 B 5 10% 1,000,000 600 C 5 10% 1,000,000 1,500 D 4 12% 500,000 500 E 3 5% 1,200,000 500 a. For each arrangement, calculate the benefits from using the lock- box system. b. Considering the bank fee for each arrangement, which lockbox systems are attractive?
Consider the following five different lockbox arrangements:
|
Arrangement | Float Reduction, in Days | Opportunity Cost per Y ear | Annual Collections | Bank Fee for Lockbox |
| A | 3 | 10% | $1,000,000 | $500 |
| B | 5 | 10% | 1,000,000 | 600 |
| C | 5 | 10% | 1,000,000 | 1,500 |
| D | 4 | 12% | 500,000 | 500 |
| E | 3 | 5% | 1,200,000 | 500 |
a. For each arrangement, calculate the benefits from using the lock- box system.
b. Considering the bank fee for each arrangement, which lockbox systems are attractive?
Step by step
Solved in 3 steps with 4 images
