Problem 27-5 NPV and Collection Time Your firm has an average receipt size of $130. A bank has approached you concerning lockbox service that will decrease your total collection time by two days. You typical receive 6,600 checks per day. The daily interest rate is .018 percent. The bank charges lockbox fee of $185 per day. a. What is the NPV of accepting the lockbox agreement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. 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 answer to 2 decimal places, e.g., 32.16.) a. NPV b. Net annual savings
Problem 27-5 NPV and Collection Time Your firm has an average receipt size of $130. A bank has approached you concerning lockbox service that will decrease your total collection time by two days. You typical receive 6,600 checks per day. The daily interest rate is .018 percent. The bank charges lockbox fee of $185 per day. a. What is the NPV of accepting the lockbox agreement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. 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 answer to 2 decimal places, e.g., 32.16.) a. NPV b. Net annual savings
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:Problem 27-5 NPV and Collection Time
Your firm has an average receipt size of $130. A bank has approached you concerning a
lockbox service that will decrease your total collection time by two days. You typically
receive 6,600 checks per day. The daily interest rate is .018 percent. The bank charges a
lockbox fee of $185 per day.
a. What is the NPV of accepting the lockbox agreement? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. 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 answer to 2 decimal
places, e.g., 32.16.)
a. NPV
b. Net annual savings
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 6 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education