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It takes Cookie Cutter Modular Homes, Inc., about six days toreceive and deposit checks f

It takes Cookie Cutter Modular Homes, Inc., about six days toreceive and deposit checks f

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.

 

a.

What is the reduction in outstanding cash balances as a resultof implementing the lockbox system?

 

  Cash balancereduction

$  

 

b.

What is the daily dollar return that could be earned on thesesavings? (Round your answer to 2 decimal places. (e.g.,32.16))

 

  Dollar return

$  

 

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))

 

  Maximum monthlycharge

$  

 

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

$  

 

Abhinav 04-Dec-2019

Answer (UnSolved)

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