Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.15P
a.
Summary Introduction
To determine: The amount of cash will be made available for other uses under the lockbox system.
b.
Summary Introduction
To determine: The net benefit (cost) will the firm realize if it adopts the lockbox system and should it adopt the proposed lockbox system
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Lockbox system Eagle Industries feels that a lockbox system can shorten its accounts receivable collection period by 2 days Credit sales are $3,400,000 per year, billed on a continuous basis. The firm has
other equally risky investments with a return of 12%. The cost of the lockbox system is $11,000 per year (Note Assume a 365-day year)
a. What amount of cash will be made available for other uses under the lockbox system?
b. What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system?
a. The amount of cash that will be made available for other uses under the lockbox system is $ (Round to the nearest dollar)
Lockbox system Eagle Industries believes that a lockbox system can shorten its accounts receivable collection period by 3 days. Credit sales are $3,240,000 per year, billed on a continuous basis. The firm has other equally risky investments that earn a return of 15%. The cost of the lockbox system is $9,000 per year. (Note: Assume a 365-day year.)
a. What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system?
7. You borrow $100,000 for the purchase of an automation system in your company. The payments at 6% is $7,265 per year for 30 years. You decide that you can afford to pay $9,000 every year instead of $7,265. How long will it take to pay off this loan?
Do not use excel, please work the problem out, and include cashflow diagram if possible.
Chapter 15 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 15.1 - Why is working capital management one of the most...Ch. 15.1 - Prob. 15.2RQCh. 15.1 - Prob. 15.3RQCh. 15.2 - Prob. 15.4RQCh. 15.2 - Prob. 15.5RQCh. 15.2 - What are the benefits, costs, and risks of an...Ch. 15.2 - Prob. 15.7RQCh. 15.3 - Prob. 15.8RQCh. 15.3 - Briefly describe the following techniques for...Ch. 15.3 - Prob. 15.10RQ
Ch. 15.4 - Prob. 15.11RQCh. 15.4 - Prob. 15.12RQCh. 15.4 - What are the basic tradeoffs in a tightening of...Ch. 15.4 - Prob. 15.14RQCh. 15.4 - Prob. 15.15RQCh. 15.4 - Prob. 15.16RQCh. 15.5 - Prob. 15.17RQCh. 15.5 - What are the firms objectives with regard to...Ch. 15.5 - Prob. 15.19RQCh. 15.5 - Prob. 15.20RQCh. 15.5 - Prob. 15.21RQCh. 15 - EOQ analysis Thompson Paint Company uses 60,000...Ch. 15 - Learning Goal 4 ST15- 3 Relaxing credit standards...Ch. 15 - Learning Goal 2 E15-1 Everdeen Inc. has a 90-day...Ch. 15 - Learning Goal 2 E15-2 Icy Treats Inc. is a...Ch. 15 - Prob. 15.3WUECh. 15 - Forrester Fashions has annual credit sales of...Ch. 15 - Prob. 15.1PCh. 15 - Learning Goal 2 P15-2 Changing cash conversion...Ch. 15 - Learning Goal 3 P15-5 EOQ analysis Tiger...Ch. 15 - EOQ, reorder point, and safety stock Alexis...Ch. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Relaxation of credit standards Lewis Enterprises...Ch. 15 - Initiating an early payment discount Gardner...Ch. 15 - Shortening the credit period A firm is...Ch. 15 - Lengthening the credit period Parker Tool is...Ch. 15 - Prob. 15.14PCh. 15 - Prob. 15.15PCh. 15 - Prob. 15.16PCh. 15 - Prob. 15.18P
Knowledge Booster
Similar questions
- Write the solution including the CASH FLOW DIAGRAMarrow_forwardAnswer and draw the cashflow diagram The buyer of a certain machine may pay either 200,000 cash down payment and 200,000 annually for the next 6 years, or pay 350, 000 cash and 200, 000 annually for the next five years. If the money is worth 12% compounded annually, which method of payment is better for the buyer and by how much?arrow_forwardMANUAL SOLUTION AND CASH FLOW DIAGRAMarrow_forward
- Need helparrow_forwardA bookstore is planning to purchase an automated inventory/remote marketing system, which includes an upgrade to a more sophisticated cash register system. The package has an initial investment cost of $360,000. It is expected to generate $144,000 of annual cash flows, reduce costs and provide incremental cash revenues of $326,000, and incur incremental cash expenses of $200,000 annually. What is the payback period and accounting rate of return (ARR)?arrow_forwardProblem 5. You have to determine an investment strategy for the next three years. At present (time 0) the amount of $100,000 is available for investment. Five investments are available. The cash flows associated with investing $1 in each of them are given in the table below. At most $75,000 can be placed in any single investment. Returns from investments can be reinvested immediately. Cash earns 8% per year. The cash flows are given in the table below. Time 3 $0.50 $0.00 -$1.00 Investment C| -$1.00 | $1.20 $0.00 Investment A -$1.00 $0.00 $1.00 $0.50 $1.00 $0.00 $0.00 $0.00 $1.90 $0.00 -$1.00 $1.50 Investment B -$1.00 $0.00 Investment D Investment E This table should be read as follows: every dollar committed to Investment A causes outflow of $1 at time 0 (now), inflow of $0.50 at time 1, and inflow of $1 at time 2. Each dollar committed to Investment B results in outflow of $1 at time 1, inflow of $0.50 at time 2, and inflow of $1 at time 3, etc. Money obtained from Investment A at…arrow_forward
- Need answer pleasearrow_forwardYou expect to receive two cash flows: $41,000 paid in 5 years and $61,500 paid in 10 years. You'll put the money into a savings account with an annual interest rate of 8%. What is the future value of the combined cash flows, in 15 years? Please Introduction and explanation without plagiarism please and use math tools plZarrow_forwardNot use excelarrow_forward
- What is the value of 'FREE CASH FLOW' in the year 2021? Rs. 1.23 million Rs. 2.95 million Rs. 3.95 million Rs. 5.04 millionarrow_forwardJefferson Bank lent a newly graduated engineer $1000 at i = 10% per year for 4 years to buy home office equipment. From the bank’s perspective (the lender), the investment in this young engineer (the borrower) is expected to produce an equivalent net cash flow of $315.47 for each of 4 years. A = $1000(A/P,10%,4) = $315.47 This represents a 10% per year rate of return on the bank’s unrecoveredbalance. Compute the amount of the unrecovered investment for each of the 4 years using (a) the rate of return on the unrecovered balance (the correct basis) and (b) the return on the initial $1000 investment (the incorrect basis).arrow_forward12. I need help with finance home work question asap please An investment that would require an initial cash outflow of $360,000 at the beginning is expected to produce cash inflows of $70,000 at the end of each of the investment's 7 years. Assume the required return is 13% and you wanted to determine the investment's discounted paypack period. What amount would you subtract from the investment's initial cash outflow of $360,000 when determining how much of the initial cost would be left to recover on a discounted basis at the beginning of the second year?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College