Problem 1 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 two days. Based on the following information, should the lockbox system be adopted? Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 400 $1,200 $.35 6.0% How would your answer change if there were a fixed charge of $6,000 per year in addition to the variable charge?
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- Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 800 payments a day will be made to lock boxes with an average payment size of $3,000. The bank’s charge for operating the lock boxes is $0.50 a check. The interest rate is 0.015% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) b. Is it worthwhile to adopt the system? (Yes/No) c. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lockbox system. She forecasts that 220 payments a day will be made to lockboxes with an average payment size of $3,300. The bank’s charge for operating the lockboxes is $0.58 a check. Assume an interest rate of 8% and a 365-day year. What reduction in the time to collect and process each check is needed to justify use of the lockbox system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 600 payments a day will be made to lock boxes with an average payment size of $2,000. The bank’s charge for operating the lock boxes is $0.30 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) b. Is it worthwhile to adopt the system? multiple choice Yes No c. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
- Proposal #2 would establish local collection centers throughout the region to decrease the time it takes to convert credit payments that are mailed in by check to cash. It is estimated that establishing these collection centers would reduce the average collection time by 2 days. 1.If the company currently averages $50,000 in collections per day, how many dollars will this suggested cash management system free up? 2.If all freed up dollars would be used to pay down debt that has an interest rate of 8%, how much money could be saved each year in interest expense? 3 Do the numbers suggest that this new system should be implemented if its total annual cost is $7000? Explain.Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 700 payments a day will be made to lock boxes with an average payment size of $3,500. The bank’s charge for operating the lock boxes is $0.50 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 700 payments a day will be made to lock boxes with an average payment size of $3,500. The bank’s charge for operating the lock boxes is $0.50 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.)Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 300 payments a day will be made to lock boxes with an average payment size of $2,000. The bank’s charge for operating the lock boxes is $0.40 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) Net Daily Advantage _________________ b. Is it worthwhile to adopt the system? Yes No c. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
- Alice’s second initiative calls for Fresh & Fruity to obtain a bank loan of a sufficient size to enable the company to take all suppliers’ discounts. What is the minimum size of this loan? (Hint: To take all suppliers’ discounts, the average payment period must be 10 days, and net purchases will be purchases – (Purchases from Figure 1 x .02). Assume that all this happens, and solve the following formula for the new accounts payable balance, using: Accounts payable = Average payment period x Purchase per day* *Based on net purchases/360. Now compare the accounts payable you just solved with the new accounts payable balance you found in question 3. The difference is the size of the loan that is required. Assume that Fresh &Fruity does obtain an 8 percent loan for one year in the amount you solved in question 5, and it reduces its accounts payable balance accordingly. Now the company is taking 2 percent discounts on all purchases and paying 8 percent a year on the loan…Choose the correct letter and provide solution A firm has total annual sales (all credit) of P100,000.00 and accounts receivable of P20,000.00. How rapidly (in how many days) must accounts receivable be collected if management wants to reduce the accounts receivable to P15,000.00? *a. 22.8 daysb. 34.8 daysc. 44.8 daysd. 52.8 dayse. 54.8 daysYour firm has an average receipt size of $155. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 5,700 checks per day. The daily interest rate is 0.018 percent. The bank charges a lockbox fee of $115 per day. What is the NPV of accepting the lockbox agreement? (Round your answer to 2 decimal places. (e.g., 32.16)) NPV $ What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Net annual savings $.
- Your firm has an average receipt size of $135. A bank has approached you concerning a lockbox service that will decrease your total collection time by one day. You typically receive 7, 300 checks per day. The daily interest rate is .016 percent. The bank charges a lockbox fee of $125 per day, a. What is the NPV of accepting the lockbox agreement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)Study this case and answer question asked below: You have the following quotes from Bank A & Bank B Bank A: Bank B SPOT USD/CHF 1.4650/55 USD/CHF 1.4653/60 3-months 5/10 6-months 10/15 Cash/Spot 1/2 SPOT GBP/USD 1.7645/60 GBD/USD 1.7640/50 3-months 25/20 6-months 35/25 If you want to buy 1 million GBP Spot against CHF you have to pay Minimum Amount you have to pay is a. CHF 2.5866 Million b. CHF 2.5881 Million c. CHF 2.5875 Million d. CHF 2.5863 MillionThe firm's bank charges $18 per wire and $0.50 per EDT. The EDT takes one day longer to clear. The investment opportunity rate is 4%. The bank's Earnings credit rate is 0.5% on account balances. The RRR is 10%. What is the minimum transfer balance that justifies a wire transfer? Step by step explanation needed with correct answer.