On average, a firm collects checks totaling $250,000 per day. It takes the firm approximately 4...

On average, a firm collects checks totaling $250,000 per day. It takes the firm approximately 4 days from the day the checks were mailed until they result in usable cash for the firm. Assume that (1) a lockbox system could be employed which would reduce the cash conversion procedure to 2 1/2 days and (2) the firm could invest any additional cash generated at 6% after taxes. The lockbox system would be a good buy if it costs $25,000 annually.

a. True

b. False

Expert Solution

jeff jeffy answered 7 months ago

Jumpdisk Company writes checks averaging $32,000 a day and it takes five days for these checks...

Jumpdisk Company writes checks averaging $32,000 a day and it takes five days for these checks to clear. The firm also receives checks in the amount of $35,000 per day, but the firm loses four days while its receipts are being deposited and cleared. What is the firm's net float in dollars?

Madison Corner writes 26 checks a day for an average amount of $481 each. These checks...

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