Problem1your firm has an average receipt size of 120 a bank, Ask an Expert

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Problem:1

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 6,800 checks per day. The daily interest rate is 0.017 percent. The bank charges a lockbox fee of $170 per day.

Required:

Question 1: What is the NPV of accepting the lockbox agreement?

Question 2: What would the net annual savings be if the service were adopted?

Note: Please show how you came up with the solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166962

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