Considering the establishment of lockbox system

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Reference no: EM131497473

Linkup Systems, which provides investors with computerized information about stock prices, is considering the establishment of a lockbox system with its bank. It has just implemented a new system which allows it to extend disbursement by 0.5 days. Its daily payments are $1 million. The firm receives daily collections of $2.5 million, and could earn 7.5% on any funds freed up through faster collections. If the lockbox system can save 2 days in the collection process, and the firm's bankers will charge $250,000 per year to operate the lockbox system and facilitate the extended disbursements, is it worth it to the company?

Reference no: EM131497473

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