Home / Questions / It takes Cookie Cutter Modular Homes, Inc., about six days toreceive and deposit checks f
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It takes Cookie Cutter Modular Homes, Inc., about six days toreceive and deposit checks from customers. Cookie Cutter’smanagement is considering a lockbox system to reduce the firm’scollection times. It is expected that the lockbox system willreduce receipt and deposit times to three days total. Average dailycollections are $120,000, and the required rate of return is 4percent per year. Assume 365 days per year. |
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a. |
What is the reduction in outstanding cash balances as a resultof implementing the lockbox system? |
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Cash balancereduction |
$ |
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b. |
What is the daily dollar return that could be earned on thesesavings? (Round your answer to 2 decimal places. (e.g.,32.16)) |
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Dollar return |
$ |
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c-1 |
What is the maximum monthly charge Cookie Cutter should pay forthis lockbox system if the payment is due at the end of the month?(Round your answer to 2 decimal places. (e.g.,32.16)) |
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Maximum monthlycharge |
$ |
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c-2 |
What is the maximum monthly charge Cookie Cutter should pay forthis lockbox system if the payment is due at the beginning of themonth? (Round your answer to 2 decimal places. (e.g.,32.16)) |
|
Maximum monthlycharge |
$ |
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