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Calculating Transactions Required
Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast. A Philadelphia-area bank will provide this service for an annual fee of $15,000 paid at the end of the year plus 10 cents per transaction. The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year.
If the average customer payment in this region is $4,800, how many customers are needed, on average, each day to make the system profitable for Cow Chips? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Number of customers per day
An umbrella liability policy:
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