What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)

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: 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: Eloville Bank want to earn an effective annual return on its consumer loans of 16 percent per year.…

A: The return on an investment or the amount of interest due on a loan when compounding is taken into…

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

A: Cost of line of credit = committed cost + interest cost.

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: HoneySing is a commercial enterprise which markets materials of construction to building…

A: Interest rate risk is arises due to fluctuation in interest rate in market due to various factors.

Q: City Loans wants to earn an effective annual return on its consumer loans of 18.9 percent per year.…

A: Given information: Effective annual rate : 18.9% Compounding : Daily  Note: Since the calculator…

Q: Proposal #2 would establish local collection centers throughout the region to decrease the time it…

A: The answer is stated below:

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: 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: 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: 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: 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: 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: 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: General Products writes checks that average $33,000 daily. These checks take an average of 6 days to…

A: Data given: Average payments received daily = $35,000 Float time = 3 days Float time is the time…

Q: Beasley Enterprises has an agreement with Downtown Bank whereby the bank handles $1.02 million in…

A: The net present value is a tool or technique that helps to analyze the profitability of the project.

Q: Your firm has an average receipt size of $135. A bank has approached you concerning a lockbox…

A: In this scenario, our objective is to assess whether the lockbox project should be approved,…

Q: The Jeremy Flores Club has annual revenue of EUR 7 million and all sales are on account. Good credit…

A: 1. Max account receivables = ACP×sales365 =30×7 million365=EUR 575,342

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: Axis Wells and Excavation (AWE) currently generates $198,000 in annual credit sales. AWE sells on…

A: Day sales outstanding is the number of days it takes for the company to recover its revenue from…

Q: Axis Wells and Excavation (AWE) currently generates $110,000 in annual credit sales. AWE sells on te…

A: Day sales outstanding is the number of days it takes for the company to recover its revenue from…

Q: Your firm has an average receipt size of $60. A bank has approached you concerning a lockbox service…

A: Given, Average receipt size = $60 Total collection time decreases = 2 days Checks received per day =…

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…

Q: Bird's Eye Treehouses Inc. has determined that a majority of its customers are located in the…

A: 2. Recalculate Present Value and NPV:Follow steps 7 and 8 from part 1 using the new annual net cash…

Q: Use this information for questions 9 to 12: You are put in charge of starting a credit card business…

A: “Since you have posted multiple questions, we will solve the first question for you. To get the…

Q: (Related to Checkpoint 18.2) (Estimating the cost of bank credit) Paymaster Enterprises has arranged…

A: APR stands for Annual Percentage Rate. It is a measure used to express the true cost of borrowing on…

Q: Accusoft Systems is offering small business owners a software package that keeps track of many…

A: PAYBACK PERIOD IS THE PEROD DURING WHICH THE FIRM RECOVERS INITIAL INVESTMENT OF THE PROJECT. given,…

Q: How much would XYZ save each year by improving its receivables process by one day?

A: To calculate the savings, we first need to find out the daily credit sales and then calculate the…

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

A: Lockbox system is a service provided by banks to different companies with regards to receipt of…

Q: You are looking for a bank in which to open a checking account for your new part-time business. You…

A: Cost (in $) of doing business with each bank for a year: Bank 1: Since average daily balance is…

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

A: A lockbox system has the advantages of quicker capital access, better cash flow, and shorter…

Q: Murkywater Company is considering a lockbox system. Its collection delay is currently 12 days.…

A: Averagw daily collections means on an average how much amount is collected on daily basis. This is…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.