Lock-box system concept, When the lock-box system could be

Lock-box system concept

Reference no: EM1323730

Century Corporation uses a continuous billing system that results in average daily receipts of $600,000. The company treasurer estimates that a proposed lock-box sytem could reduce its collection time by 2 days.

(a) How much cash would the lock-box system free up for the company?

(b) What is the maximum amount that Century Corporation would be willing to pay for the lock-box system if it can earn 6%on available short-term funds?

(c) If the lock-box system could be arranged at an annual cost of $40,000, what would be the net gain from instituting the lock-box system?

Reference no: EM1323730

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