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How many customers are needed

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Question - Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast. A Philadelphia-area bank will provide this service for an annual fee of $8,000 paid at the end of the year plus 5 cents per transaction. The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year.

If the average customer payment in this region is $5,000, how many customers are needed, on average, each day to make the system profitable for the company?

Reference no: EM133156681

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