Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year.


Average number of payments per day		860
Average value of payment	$	810
Variable lockbox fee (per transaction)	$	.15
Annual interest rate on money market securities		4.8	%


a.	What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	Suppose in addition to the variable charge that there is an annual fixed charge of $5,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Expert Solution

jeff jeffy answered 8 months ago

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2.5 days. Assume 365 days a year. Average number of payments per day 840 Average value of payment $ 790 Variable lockbox fee (per transaction) $ 0.20 Annual interest...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2 days. Assume 365 days a year. Average number of payments per day 780 Average value of payment $ 730 Variable lockbox fee (per transaction) $ .15 Annual interest...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2 days. Average number of payments per day 770 Average value of payment $ 720 Variable lockbox fee (per transaction) $ .20 Annual interest rate on money market securities...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2 days. Assume 365 days a year. Average number of payments per day 780 Average value of payment $ 730 Variable lockbox fee (per transaction) $ .15 Annual interest rate...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day 850 Average value of payment $ 800 Variable lockbox fee (per transaction) $ .10 Annual interest...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2.5 days. Assume 365 days a year. Average number of payments per day 710 Average value of payment $ 660 Variable lockbox fee (per transaction) $ .20 Annual interest...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2 days. Average number of payments per day 780 Average value of payment $ 730 Variable lockbox fee (per transaction) $ .15 Annual interest rate on money market securities...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. Therefore, it is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2 days. Average number of payments per day 870 Average value of payment $ 820 Variable lockbox fee (per transaction) $ .20 Annual interest rate on money market securities 4.6...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 2 days. Assume 365 days a year. Average number of payments per day 770 Average value of payment $ 720 Variable lockbox fee (per transaction) $ .20 Annual interest...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. Therefore, it is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Average number of payments per day 860 Average value of payment $ 810 Variable lockbox fee (per transaction) $ .15 Annual interest rate on money market securities 4.8...

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Bird's Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are...

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