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A company receives on average 200 checks with average value $900. The company is considering two (2) lock boxes. The bank agrees to go to the post office two times a day process checks and deposit checks with same day clearing. The bank is saving the company 3 days. The bank is charging $0.12 per check to process it and $30 day wire transfer to the company’s main bank at end of each day. The company’s hurdle return per year is 14.60% and per day is 14.60%/365 = .040%.

-How much is the total benefits for all 4 boxes?

-How much is the present value of the perpetual bank fees?

-How much is the NPV? Should it go ahead with this arrangement?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92801349

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