Considering operating a lock-box system

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Reference no: EM131022474

Can you help me answer section b. of this question? I already answered section a-1 and a-2 and they came out as right. Just missing part b. My textbook says: "the break-even reduction number of days occurs when the net daily advantage of the system is zero"

Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 500 payments a day will be made to lock boxes with an average payment size of $2,500. The bank’s charge for operating the lock boxes is $.30 a check. The interest rate is .011% per day.

a-1. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.)

Daily interest saved $ 125

a-2. Is it worthwhile to adopt the system? Yes

b. 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.)

Minimum reduction in time days: ____

Reference no: EM131022474

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