Lockbox system to reduce the firms collection times

Assignment Help Financial Management

Reference no: EM131083021

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 $124,000, 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? Cash balance reduction $ b. What is the daily dollar return that could be earned on these savings? (Round your answer to 2 decimal places. (e.g., 32.16)) Dollar return $ c-1 What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the end of the month? (Round your answer to 2 decimal places. (e.g., 32.16)) Maximum monthly charge $ c-2 What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the beginning of the month? (Round your answer to 2 decimal places. (e.g., 32.16)) Maximum monthly charge $

Reference no: EM131083021

Questions Cloud

Companies involved benefit from the innovations discussed : a)How do the companies involved benefit from the innovationsdiscussed in the case? Is it about more efficienttransaction processing, better reaching out tocustomers,or both?Use examples from the case to illustrate your answer.

Current total carrying costs and economic order quantity : The Trektronics store begins each week with 240 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $29 per year and the fixed order cost is $51. What are the current total carrying costs? What is the eco..

A brief research-based statement of your personal philosophy : A proposal of how the health care model articulated above can be operationalized in a real-world setting.

Integrated marketing communications brief : Please select a brand that has a brand problem. For example, recent player legal troubles have been a problem for the NFL brand. Another example is the Bonefish Grill, the country's second largest seafood chain after Red Lobster. Although their ch..

Lockbox system to reduce the firms collection times : 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. What is the maximum monthly charge Cookie Cutte..

Prepare a schedule to compute expected cash collections : Prepare a schedule to compute expected cash collections for the month of May and Prepare a schedule to compute expected cash payments for the month of May

Meeting of equity shareholders : Equity Company and Faye enter into a contract for Faye to cater a meeting of Equity's shareholders. When Faye's schedule conflicts, she asks Gudren to serve Faye's coffee and pastries at the meeting. This transfer of duties is

Compute the employers liability for unemployment taxes : You will now compute the employer's liability for unemployment taxes (FUTA and SUTA) for the pay of January 14. These computations will be used at the end of Chapter 6 in recording the payroll tax entries.

Average collection-what is effective cost of borrowing : Your firm has an average collection period of 23 days. Current practice is to factor all receivables immediately at a discount of 1.3 percent. What is the effective cost of borrowing in this case?

User Account

All Pages