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The Alabang Company has a daily average collection of checks of P250000 It takes the company 4 days to convert the checks to cash Assume a lockbox system would have a net cost of P25000 per year

The Alabang Company has a daily average collection of checks of P250,000. It takes the company 4 days to convert the checks to cash. Assume a lockbox system would have a net cost of P25,000 per year, but any additional funds made available could be invested to net 8 percent per year. Should Alabang adopt the lockbox system?
A. Yes, the system would free P250,000 in funds
B. Yes, the benefits of the lock-box system exceed the costs
C. No, the benefit is only P10,000
D. No, the firm would lose P5,000 per year if the system were used

Jun 20 2021 View more View Less

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