Daily dollar return that could be earned on these savings

Assignment Help Financial Management

Reference no: EM131082806

It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are $126,000, and the required rate of return is 4 percent per year. Assume 365 days per year.

What is the reduction in outstanding cash balances as a result of implementing the lockbox system?

What is the daily dollar return that could be earned on these savings?

What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the end of the month?

What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the beginning of the month?

Reference no: EM131082806

Questions Cloud

What is the dividend growth rate : A stock had a total return of 9.62 percent last year. The dividend amount was $.70 a share which equated to a dividend yield of 2.39 percent. What is the dividend growth rate?

Capital structure consists solely of debt and common equity : Miller Von Enterprises' capital structure consists solely of debt and common equity. It can issue debt at rd = 10.6%, and its common stock currently pays a $1.91 dividend (D0= $1.91). The stock's price is currently $24.75, its dividend is expected to..

Bonds are offered by state and local governments : bonds are offered by state and local governments? preferred pays all dividends in the rear that might have been skipped. How many votes does a preferred stock get compared to common stock. When advances are higher than declines, advance/decline indic..

Units of the part are? held-on? average-as cycle? inventory : Terminator, Inc., manufactures a motorcycle part in lots of 350350 units. The raw materials cost for the part is ?$170170?, and the value added in manufacturing 1 unit from its components is ?$300300?, for a total cost per completed unit of ?$470470...

Daily dollar return that could be earned on these savings : It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. What is the reduction in outstanding cash balan..

The interest rate on three-month treasury securities : If the newspaper reported that the interest rates on 10-year Treasury securities was 5 percent and the interest rate on three-month Treasury securities was 6 percent, would it be a good time to invest in the stock market? Explain your reasoning?

Calculate the operating and cash cycles : Consider the following financial statement information for the Ayala Corporation: Item Beginning Ending Inventory $ 10,400 $ 11,400 Accounts receivable 5,400 5,700 Accounts payable 7,600 8,000 Credit sales $ 84,000 Cost of goods sold 64,000 Calculate..

What would happen to the yield curve : What would happen to the yield curve if investors were concerned about stability in foreign countries and rushed their money into the United States to buy Treasury securities? How would you expect the term premium to change? Explain.

What is insolvency risk : What is insolvency risk? How can liquidity risk and credit risk cause insolvency? What actions can a financial institution take to best protect itself against insolvency?

User Account

All Pages