You are considering implementing a lockbox system for your firm. The system is expected to reduce the average collection time by 1.3 days. On an average day, your firm receives 136 checks with an average value of $219 each. The daily interest rate on Treasury bills is 0.021 percent. The bank charge per check is $0.26. What is the anticipated daily cost of the lockbox system?
Daily cost = 136 × $0.26 = $35.36
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72.
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You are considering implementing a lockbox system for your firm. The system is expected to reduce the average collection time by 2.8 days. On an average day, your firm receives 2,419 checks with an average value of $1,287 each. The daily interest rate on Treasury bills is 0.016 percent. The bank charge per check is $0.30. What is the net present value of this lockbox arrangement?
Net present value = [2,419 × $1,287 × 2.8] - [(2,419 × $0.30)/.00016] = $4,181,483
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73.
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Rosewell International receives an average of 268 checks a day with an average amount per check of $780. The firm is considering a lockbox system which it anticipates will reduce the average collection time by 1.4 days. The bank charges $0.21 a check for this service. The daily interest rate on Treasury bills is 0.02 percent. What is the net present value of this lockbox arrangement?
Net present value = [268 × $780 × 1.4] - [(268 × $0.21)/.0002] = $11,256
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74.
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The Eliot Co. needs $185,000 a week to pay bills. The standard deviation of the weekly disbursements is $17,600. The firm has established a lower cash balance limit of $75,000. The applicable interest rate is 5.5 percent and the fixed cost of transferring funds is $47. Based on the BAT model, what is the optimal initial cash balance?
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