What is the NPV of the new lockbox system

Assignment Help Financial Management

Reference no: EM132032628

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 5.3 %

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.)

NPV $

Suppose in addition to the variable charge that there is an annual fixed charge of $4,000 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.)

NPV $

Reference no: EM132032628

Questions Cloud

Consider various techniques for capital decision-making : Through this discussion we consider various techniques for capital decision-making.

What is the maximum cost of the project : What is the maximum cost of the project that the company should take the new project?

Change in the market value of the firm after exchange : Should you do this, and why? What would be the change in the market value of the firm after the exchange?

Recent change in management promises brighter future : The VSE Corporation currently pays no dividend because of depressed earnings. A recent change in management promises a brighter future.

What is the NPV of the new lockbox system : It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. What is the NPV of the new lockbox system?

Considering producing and selling new line of golf clubs : Gilmore Golf, Inc is considering producing and selling a new line of golf clubs. Find the NPV, IRR, and PI.

What are equivalent annual costs of each machine : What are the equivalent annual costs of each machine? Which machine should Alexander Industries select?

Should the borrower refinance : Suppose the closing cost for the new loan will be $5,500 plus $150 for recording fees. Should the borrower refinance?

What would happen to the required return on company stock : what would happen to the firm’s WACC? What would happen to the required return on the company’s stock?

User Account

All Pages