FGC generate if implemented lockbox system

Assignment Help Financial Management

Reference no: EM131910324

LOCKBOX SYSTEM

Fisher-Gardner Corporation (FGC) began operations 5 years ago as a small firm serving customers in the Chicago area. However, its reputation and market area grew quickly. Today FGC has customers all over the United States. Despite its broad customer base, FGC has maintained its headquarters in Detroit, and it keeps its central billing system there. On average, it takes 5 days from the time customers mail in payments until FGC can receive, process, and deposit them. FGC would like to set up a lockbox collection system, which it estimates would reduce the time lag from customer mailing to deposit by 2 days-bringing it down to 3 days. FGC receives an average of $1,200,000 in payments per day.

A) How much free cash would FGC generate if it implemented the lockbox system? Round your answer to the nearest dollar.

B) Would this be a one-time cash flow or a recurring one, assuming the company ceases to grow?

-Select the best option

1) One-time cash flow

2) A recurring cash flowItem 2

C) How would growth affect your answer?

If the firm grows, cash flow

-Select the best option

1) Would be a one-time cash flow

2) Would increase by the differential growth

3) Would decrease by the differential growth

D) If FGC has an opportunity cost of 6%, how much is the lockbox system worth on an annual basis? Round your answer to the nearest dollar.

E) What is the maximum monthly charge FGC should pay for the lockbox system? Round your answer to the nearest cent.

Reference no: EM131910324

Questions Cloud

Firm current assets are financed with long-term liabilities : When a portion of the firm’s current assets are financed with long-term liabilities, the firm has a

Calculate the expected value for firm cs eps : calculate the expected value for Firm C's EPS. Discuss the relative riskiness of the three firms' earnings using their respective coefficients of variation.

Pension department-some of liabilities and risk control : You graduated from USF and got a job at MetLife pension department. Your supervisor needs your help with some of its liabilities and risk control.

Calculate the rate of return on equity for each firm : Calculate the rate of return on equity (ROE) for each firm. Calculate the return on invested capital (ROIC) for each firm.

FGC generate if implemented lockbox system : How much free cash would FGC generate if it implemented the lockbox system?

What is current beta on MMEs common stock : What is the current beta on MME's common stock? What would MME's beta be if the company had no debt in its capital structure?

Expected return on equity under current assets level : What is the expected return on equity under each current assets level?

Receivables investment : What is the average amount of receivables? What is the percentage cost of trade credit to customers who take the discount?

Compute fair market value and evaluate the stock : Use the Dividend Discount Model (DDM) to compute a fair market value and evaluate the stock.

User Account

All Pages