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Lockbox system
Eagle Industries feels that a lockbox system can shorten its accounts receivable collection period by 4 days. Credit sales are ?$2,500,000 per? year, billed on a continuous basis. The firm has other equally risky investments with a return of 10?%. The cost of the lockbox system is ?$12,000 per year. ?(Note?: Assume a? 365-day year.)
a. What amount of cash will be made available for other uses under the lockbox? system?
b. What net benefit? (cost) will the firm realize if it adopts the lockbox? system? Should it adopt the proposed lockbox? system?
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