Lockbox system eagle industries believes that a lockbox, Ask an Expert

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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 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?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91600447

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