Sherman's Sherbet currently takes about 6 days to collect and deposit checks from customers. A lock-box system could reduce this time to 3 days. Collections average $45,000 daily. The interest rate is 0.02% per day. a. By how much will the lock-box system reduce float? Decrease in collection float b. What is the daily interest savings of the system? Daily interest savings c. Suppose the lock-box service is offered for a fixed monthly fee instead of payment per check. What is the maximum monthly fee that Sherman's should be willing to pay for this service? (Assume a 30-day month.) Maximum monthly fee

Sherman's Sherbet currently takes about 6 days to collect and deposit checks from customers. A lock-box system could reduce this time to 3 days. Collections average $45,000 daily. The interest rate is 0.02% per day. a. By how much will the lock-box system reduce float? Decrease in collection float b. What is the daily interest savings of the system? Daily interest savings c. Suppose the lock-box service is offered for a fixed monthly fee instead of payment per check. What is the maximum monthly fee that Sherman's should be willing to pay for this service? (Assume a 30-day month.) Maximum monthly fee

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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