It typically takes Law Corporation 8 days to receive and deposit customer remissions. Law is considering a lockbox system and anticipates that the system will reduce the float time to 5 days. Average daily cash receipts are P220,000. The rate of return is 10 percent. Requirement: What is the reduction in cash balances associated with implementing the system? What is the rate of return associated with the earlier receipt of the funds? What should be the maximum monthly charge associated with the lockbox proposal?

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: 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: What reduction in average collection time would be needed to justify the lock-box system? (Use a…

A: Average collection period is number of days it takes for company to collect its receivable from…

Q: Sherman’s Sherbet currently takes about 6 days to collect and deposit checks from customers. A…

A: Collection average = $15,000 Days of collection = 6 Reduced time = 3 Interest rate = 0.02%

Q: ISA is planning to spend $650,000 on a new marketing campaign. They believe that this action will…

A: Net Present Value = Present value of Cash Inflows – Initial investment in the project

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

A: Average account receivable = $5 Million Annual interest rate=9.5% Reduction in Average accounts…

Q: A bank that provides overdraft protection charges 12 percent for each $100 (or portion of $100)…

A: Part (a)The overdraft protection charge = 12% for each $100 (or portion of $100) borrowedThus 12% is…

Q: The minimum cash balance for Delaware's main bank account is P500,000. It has a daily cash variance…

A: Data given:: Minimum cash balance = P 500,000 Daily cash variance = P 450,000 Interest = 7% =0.07…

Q: Simmons Corporation can borrow from its bank at 21 percent to take a cash discount. The terms of the…

A: Terms of cash discount = 2.5/18 net 55Discount rate = 2.5%Discount period (in days) = 18Final…

Q: Osborne Supply Company has credit sales of $2M per year. Collections average $8000 per day. Assume…

A: In the given problem, the internal processing time is reduced by 1 day, as a result of which the…

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: firm a recieves an average of 1000 checks a day. the average check amount is 400. the collection…

A: A lockbox system is an arrangement in which a bank-operated mailing address is provided by banks to…

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: Your firm has an average receipt size of $65. A bank has approached you concerning a lockbox service…

A: Savings= Average Receipt*Number of Checks Per Day*Time Saved= 65*8700*2= 1131000

Q: The Branson Corporation is considering a change in its cash - only policy. The new terms would be…

A: Credit Cost = Price per unit as per new policy x Required ReturnIn the given case, the break even…

Q: Reduction in mailing time = 1.5 day Reduction in clearing time = 1.5 day Reduction in firm…

A: Cost associated with lockbox=Number of payments * Fees / Daily interest rate

Q: Z Corporation has a cash balance of P500,000 at the beginning of the month. Based on its forecast…

A:

Q: The firm's bank charges $18 per wire and $0.50 per EDT. The EDT takes one day longer to clear. The…

A: Since  The minimum transfer balance= TBAL TBAL=Incremental costDS×(K-ECR(1-RRR))365 Where: DS= Days…

Q: XYZ Corporation has annual cash demand of 3,000,000 for a fund set aside for operating expenses. The…

A: Optimum cash balance: It is the balance wherein the cost of depositing the fund is minimum if we…

Q: The finance director of Chessington Inc. is reviewing their target c in light of their varying cash…

A: Maintaining optimal level of cash is very important and too less cash or too more cash is not good…

Q: Bulldogs Inc. deals with various clients throughout the city and is attempting to collect its…

A: Total receipts=Daily receipts×Average amount=300×P5,000=P1,500,000

Q: On an average day, Town Center Hardware receives $2,420 in checks from customers. These checks clear…

A: Maximum amount this store should pay to completely eliminate its collection float =receives  checks…

Q: The firm PAR inc. forecasts monthly disbursements of $ 75,000 over the next year. The firm invests…

A: Data given: Monthly requirement of cash   = $75,000. Fixed Transaction cost               = $150…

Q: ABC Company is considering to establish a line of credit with a local bank to make up for the cash…

A: Interest cost=$280,100∗60%*0.60%∗3/(1−5%).=$3,184

Q: DEF Corporation will be needing P1,000,000 additional cash inflow. It is looking to finance this…

A: In this we have to calculate the effective interest rate for each option and calculate the best…

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

A: Baumol model is the cash management model that helps in managing the excess funds by using optimum…

Q: Gupta & Grant Computer Supplies usually tries to take advantage of cash discounts even if it must…

A: Cash Discount=Invoice×Rate of Discount Amount of Interest=Invoice×Interest Rate on Loan×Days of…

Q: ugh checks. On average 150 checks are received per day while each check has an average value of…

A: Given: On average 150 checks are received per day while each check has an average value of P2,500.…

Q: meila's Society Clothing Manufacturer has collection centres aroune akes its disbursements from…

A: The company always tries to increase the cash money available so that the company can work smoothly…

Q: The Polk Corporation is trying to decide whether to switch to a bank that will accommodate…

A: Collection period is the period required to receive cash amount from customersIt is given…

Q: Bird's Eye Treehouses, Incorporated, a Kentucky ompany, majority of its customers are located in the…

A: Average number of payments per day$880.00Average value of the payment$830.00Variable lockbox fee…

Q: The initial purchase price of a new stamp press is $6,000. The firm will spend $5,000 on shipping…

A: Initial purchase price of a new stamp is $6,000 Shipping and installation cost us $5,000 Training…

Q: ABC Corporation would like to know what its optimal cash balance for its petty cash fund. The daily…

A: Computation of optimum cash balance Square root of (2A * P/S) Where  A = Annual cash disbursement P…

Q: NEKO Inc. deals with various clients throughout the city and is attempting to collect its accounts…

A: Cost per year = P 180000 Daily receipts = 300 Average value of each receipt = P 5000 r = 8%

Q: A financial analyst draws a cash flow diagram to model the following scenario. A 90-day commercial…

A: Note: 365 days convention is used in the calculation for accurate answers Here, Initial cash outflow…

Q: Cow Chips, Incorporated, a large fertilizer distributor based in California, is planning to use a…

A: Net Present Value (NPV) calculates the difference between the present value of cash inflows and…