Locbox collection system, Mesa Electronics, located in

Locbox collection system

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Reference no: EM1355128

Mesa Electronics, located in Phoenix, is attempting to determine if it should set up a lockbox collection system for its Northeastern customers. Currently the firm receives an average of 350 payments per working day (assume 250 working days per year) from that section of the country. These payments provide an average daily collection of $175,000 per working day. Mesa estimates that it can reduce the collection time (both mailing and processing time) by three days and invest any funds released by the lockbox system at a 12 percent pretax annual rate. The New York bank processing the checks would charge Mesa 20¢ per check processed plus a fixed charge of $20,000 per year. Should Mesa set up the lockbox collection system utilizing the services of the bank?

Reference no: EM1355128

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