Your firm has an average receipt size of $120. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 7,400 checks per day. The daily interest rate is .017 percent. The bank charges a lockbox fee of $170 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
Your firm has an average receipt size of $120. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 7,400 checks per day. The daily interest rate is .017 percent. The bank charges a lockbox fee of $170 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
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Transcribed Image Text:Your firm has an average receipt size of $120. A bank has approached you concerning a
lockbox service that will decrease your total collection time by two days. You typically
receive 7,400 checks per day. The daily interest rate is .017 percent. The bank charges a
lockbox fee of $170 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
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