Question
In: Finance
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from...
|
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. The company’s management is considering a lockbox system to reduce the firm’s collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are $147,000, and the required rate of return is 6 percent per year. Assume 365 days per year. |
| a. |
What is the reduction in outstanding cash balances as a result of implementing the lockbox system? |
| b. | What is the daily dollar return that could be earned on these savings? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
|
c-1. |
What is the maximum monthly charge the company should pay for this lockbox system if the payment is due at the end of the month? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| c-2. | What is the maximum monthly charge the company should pay for this lockbox system if the payment is due at the beginning of the month? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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Expert Solution
SEE THE IMAGE. ANY DOUBTS,
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jeff jeffy answered 2 years agoRelated Solutions
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from...
It takes Cookie Cutter Modular Homes, Inc., about six days to
receive and deposit checks from customers. The company’s management
is considering a lockbox system to reduce the firm’s collection
times. It is expected that the lockbox system will reduce receipt
and deposit times to three days total. Average daily collections
are $147,000, and the required rate of return is 6 percent per
year. Assume 365 days per year.
a.
What is the reduction in outstanding cash balances as a...
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from...
It takes Cookie Cutter Modular Homes, Inc., about six days to
receive and deposit checks from customers. Cookie Cutter’s
management is considering a lockbox system to reduce the firm’s
collection times. It is expected that the lockbox system will
reduce receipt and deposit times to three days total. Average daily
collections are $123,000, and the required rate of return is 4
percent per year. Assume 365 days per year.
a.
What is the reduction in outstanding cash balances as...
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from...
It takes Cookie Cutter Modular Homes, Inc., about six days to
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year. Assume 365 days per year.
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