Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
14th Edition
ISBN: 9781305777118
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 9P
a.
Summary Introduction
To determine: The amount of the free cash if the lockbox system is implemented. Whether it will be one time cash flow or recurring one and explain the affect of growth.
Cash budget:
Cash budget refers to a money spending plan, which is an estimation of the money inflows and outpourings for a business over a particular timeframe. This financial plan is utilized to evaluate whether the substance has adequate money to work.
b.
Summary Introduction
To determine: The worth of the lockbox system on the annual basis.
c.
Summary Introduction
To determine: The maximum monthly charge which HGC should pay.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Help
i need help.
Ralph Taylor, a nationwide department store chain, currently processes all of its credit sales payments at its St. Louis headquarters. The firm is considering the establishment of a lockbox arrangement with a Los Angeles bank to process payments from its customers in 10 western states.
With the lockbox system, average mailing time for customers from this region would be reduced from 4 days to 1 day. Check-clearing time would also be reduced from 4 days to 1 day. Annual collections from the western region are $285 million. Establishment of this lockbox system would reduce the compensating balance requirement at the firm's St. Louis bank by $350,000 and reduce annual payment processing costs at the St. Louis office by $75,000. Funds released by the lockbox arrangement can be invested elsewhere in the firm to earn 5% before taxes. The Los Angeles bank has agreed to process Ralph Taylor's customer payments for an annual fee of $185,000.
What are the annual net pretax benefits to Ralph…
Chapter 16 Solutions
Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
Ch. 16 - What are some pros and cons of holding high levels...Ch. 16 - Prob. 2QCh. 16 - What are the two definitions of cash, and why do...Ch. 16 - Prob. 4QCh. 16 - What are the four key factors in a firm's credit...Ch. 16 - Prob. 6QCh. 16 - Why is some trade credit called free while other...Ch. 16 - Define each of the following loan terms, and...Ch. 16 - Why are accruals called spontaneous sources of...Ch. 16 - Indicate using a (+), (), or (0) whether each of...
Ch. 16 - CASH CONVERSION CYCLE Primrose Corp has 15million...Ch. 16 - RECEIVABLES INVESTMENT Lamar Lumber Company has...Ch. 16 - COST OF TRADE CREDIT AND BANK LOAN Lamar Lumber...Ch. 16 - CASH CONVERSION CYCLE Zocco Corporation has an...Ch. 16 - RECEIVABLES INVESTMENT McDowell Industries sells...Ch. 16 - WORKING CAPITAL INVESTMENT Prestopino Corporation...Ch. 16 - CASH CONVERSION CYCLE Christie Corporation is...Ch. 16 - CURRENT ASSETS INVESTMENT POLICY Rentz Corporation...Ch. 16 - Prob. 9PCh. 16 - CASH BUDGETING Helen Bowers, owner of Helens...Ch. 16 - Prob. 11SPCh. 16 - MANAGING CURRENT ASSETS Dan Barnes, financial...
Knowledge Booster
Similar questions
- Galaxy Cloud Services operates several data centers across the United States containing servers that store and process the data on the Internet. Suppose that Galaxy Cloud Services currently has five outdated data centers: one each in Michigan, Ohio, and California and two in New York. Management is considering increasing the capacity of these data centers to keep up with increasing demand. Each data center contains servers that are dedicated to Secure data and to Super Secure data. The cost to update each data center and the resulting increase in server capacity for each type of server are as follows: The projected needs are for a total increase in capacity of 90 Secure servers and 90 Super Secure servers. Management wants to determine which data centers to update to meet projected needs and, at the same time, minimize the total cost of the added capacity. Formulate a binary integer programming model that could be used to determine the optimal solution to the capacity increase question facing management. Solve the model formulated in part (a) to provide a recommendation for management.arrow_forwardPlease explain each step clearly, and no excel formula should be used for solving this problemarrow_forwardExeter Group is a large retail company that has brick-and-mortar outlets throughout the Southeast. They have been in business for many years, but two years ago started an online sales channel to offset slowing in-store sales. The human resources (HR) department at Exeter handles tasks for the two divisions that make up Exeter: Retail and Online. Retail Division manages the company's traditional business line. This business, although still profitable, is currently not growing and may be shrinking slightly. Online Division, on the other hand, has experienced double-digit growth from the beginning. The cost allocation system at Exeter allocates all corporate costs to the divisions based on a variety of cost allocation bases. HR costs are allocated based on the average number of employees in the two divisions. There are two basic activities in the HR Department. The first is employee maintenance (payroll administration, benefits, and so on), which is an ongoing activity and requires the…arrow_forward
- Exeter Group is a large retail company that has brick-and-mortar outlets throughout the Southeast. They have been in business for many years, but two years ago started an online sales channel to offset slowing in-store sales. The human resources (HR) department at Exeter handles tasks for the two divisions that make up Exeter: Retail and Online. Retail Division manages the company’s traditional business line. This business, although still profitable, is currently not growing and may be shrinking slightly. Online Division, on the other hand, has experienced double-digit growth from the beginning. The cost allocation system at Exeter allocates all corporate costs to the divisions based on a variety of cost allocation bases. HR costs are allocated based on the average number of employees in the two divisions. There are two basic activities in the HR Department. The first is employee maintenance (payroll administration, benefits, and so on), which is an ongoing activity and requires the…arrow_forward1. 2. Express Drugs RX operates a Mail order pharmaceutical business in New Jersey the firm receives an average of $325,000 in payments per day on average it takes 4 days from the time customers mail their checks until the firm receives them. The company is considering establishing a lock box system, in which customers payments would be sent to nearby banks local in terms of the purchasers instead of directly to New Jersey banks in the lock box locations would then wire the daily receipts to a single (concentration) bank. The lock box system which would consist of 10 local depository banks and a concentration bank would cost Express Drugs RX a total of $8,500 per month under the system customers’ checks would be received at the tent lock box locations one day after they are mailed and the daily total from each of the 10 lockboxes locations would be wired to the concentration bank at a cost of $11.75 per transfer Assume the firm could earn 10% on short-term…arrow_forwardThe computer manufacturer Skynet is relatively new in the industry. Their stated mission was the innovation of mobile computing for a better future. For the past 8 years they have been producing laptops, with the latest model the T-1000 released at the start of last year. Summary of Sales per model (in thousand $) Skynet T-101 208 Skynet T-600 364 Skynet T-700 254 Skynet T-800 519 Skynet T-850 307 Skynet T-1000 592 What was the sales percentage for their latest model laptop? note: write the number with at most 2 decimal places without the unit (eg. 95.17 and NOT 95.17%)arrow_forward
- Fordson Bank operates a branch in a relatively small rural community. Fordson has a strong customer service focus and knows that branch visits can be important in fostering a reputation for good customer service. However, as internet banking increases in popularity, the financial staff at Fordson question whether the costs of the branch are worth it. As part of looking at the question, a financial analyst has collected monthly data on the number of customer visits to the branch and the operating cost of the branch over the last fiscal year. The data follow: Month Customer Visits 1 2 3 4 5 6 7 8 10 12 962 1,378 1,170 1,014 1,586 1,222 1,144 1,248 1,430 1,040 1,092 1,066 Branch Cost $ 71,534 90,046 80,790 73,848 99,302 83,104 79,633 84,261 Branch cost= 92,360 75,005 77,319 76,162 Required: a. Estimate the monthly fixed costs and the unit variable cost per customer visit using the high-low estimation method. Note: Round variable cost per unit to 2 decimal places. per visit Customer visitsarrow_forwardVaibharrow_forwardJohnson Limited is contemplating the installation of a new system that would allow for automated handling of customer inquiries about their order status, account balances, etc. Currently all such inquiries are handled manually by customer service representatives. The software for the new system would cost $214,000. An additional $169,000 would be required for one-time installation costs. Management estimates that the new system would result in costs of $10,300 per year related to addressing software issues and other technological problems that may arise. However, the new system is expected to reduce labour costs by $65,000 per year. Management estimates that the system would be used for five years. Severance costs related to the employees that would be laid off after implementing the new system would be $22,600. Johnson Limited requires a return of at least 15% on investments of this type. Required: Ignore income taxes. 1. Compute the net annual cost savings promised by the new system.…arrow_forward
- Mini Case Lewis Securities Inc. has decided to acquire a new market data and quotation system for its Richmond home office. The system receives current market prices and other information from several online data services and then either displays the information on a screen or stores it for later retrieval by the firm’s brokers. The system also permits customers to call up current quotes on terminals in the lobby. The equipment costs $1,000,000 and, if it were purchased, Lewis could obtain a term loan for the full purchase price at a 10% interest rate. Although the equipment has a 6-year useful life, it is classified as a special-purpose computer and therefore falls into the MACRS 3-year class. If the system were purchased, a 4-year maintenance contract could be obtained at a cost of $20,000 per year, payable at the beginning of each year. The equipment would be sold after 4 years, and the best estimate of its residual value is $200,000. However, because real-time display system…arrow_forwardtch Pad Zynex Co manufactures a range of electronic devices, which it sells to online stores and retail outlets. It has a risk-seeking attitude and its objective is to maximise profit. Six months ago it released a new version of its smartphone, the ZV. Zynex Co's main smartphone competitor has announced that it will launch a new version of its smartphone in one month's time and Zynex Co is concerned about the effect of the launch of this rival product on future demand for the ZV. For each of the previous ten smartphones launched by its competitors, Zynex Co's marketing team has analysed the impact on Zynex Co's sales performance. This data was retained specifically for the purpose of forecasting future demand of Zynex Co's smartphones and is stored in the company's financial database. Based on this analysis, the marketing team has identified three possible outcomes for the impact on the demand of the ZV: a small decrease, a medium decrease and a large decrease. Production volumes for…arrow_forwardFinch Bank’s start-up division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is $94,000 per year. The three tellers combined can process up to 90,000 customer transactions per year. If a branch does not attain a volume of at least 60,000 transactions during its first year of operations, it is closed. If the demand for services exceeds 90,000 transactions, an additional teller is hired and the branch is transferred from the start-up division to regular operations. Required What is the relevant range of activity for new branch banks? Determine the amount of teller cost in total and the average teller cost per transaction for a branch that processes 60,000, 70,000, 80,000, or 90,000 transactions. In this case (the activity base is the number of transactions for a specific branch), is the teller cost a fixed or a variable cost? Determine the amount of teller cost in total and the average teller cost per branch for Finch Bank,…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Essentials Of Business AnalyticsStatisticsISBN:9781285187273Author:Camm, Jeff.Publisher:Cengage Learning,
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Essentials Of Business Analytics
Statistics
ISBN:9781285187273
Author:Camm, Jeff.
Publisher:Cengage Learning,
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning