a.
To determine: The amount of funds released.
a.
Answer to Problem 3P
The amount of funds released is $2,465,753.42.
Explanation of Solution
Determine the reduction in collection time
Therefore, the reduction in collection time is 5 days.
Determine the average daily collection
Therefore, the average daily collection is $493,150.68.
Determine the amount of funds released
Therefore, the amount of funds released is $2,465,753.42.
b.
To determine: The annual earnings on the released funds.
b.
Answer to Problem 3P
The annual earnings on the released funds is $2,465,753.42.
Explanation of Solution
Determine the annual earnings on the released funds
Therefore, the annual earnings on the released funds is $246,575.34.
c.
To determine: The annual fee.
c.
Answer to Problem 3P
The annual fee is $315,000.
Explanation of Solution
Determine the annual fee
Therefore, the annual fee is $315,000.
d.
To determine: The annual net benefits.
d.
Answer to Problem 3P
The annual net benefits are -$18,424.66.
Explanation of Solution
Determine the annual net benefits
Therefore, the annual net benefits are -$18,424.66.
e.
To determine: The annual net benefits.
e.
Answer to Problem 3P
The annual net benefits are $121,917.95.
Explanation of Solution
Determine the amount of funds released
Therefore, the amount of funds released is $2,465,753.42.
Determine the annual net benefits
Therefore, the annual net benefits are $121,917.95.
f.
To discuss: The lockbox system the firm should select.
f.
Answer to Problem 3P
The lockbox system the firm should select is SLC bank’s lockbox system.
Explanation of Solution
Since SLC’s bank provides a higher net benefits for the firm, the lockbox system that the firm should select is SLC bank’s lockbox system.
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Chapter 17 Solutions
Contemporary Financial Management, Loose-leaf Version
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EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT