Result of implementing the lockbox system

Assignment Help Financial Management

Reference no: EM131070693

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 $122,000, and the required rate of return is 5 percent per year. Assume 365 days per year. a. What is the reduction in outstanding cash balances as a result of implementing the lockbox system? Cash balance reduction $ b. What is the daily dollar return that could be earned on these savings? (Round your answer to 2 decimal places. (e.g., 32.16)) Dollar return $ c-1 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? (Round your answer to 2 decimal places. (e.g., 32.16)) Maximum monthly charge $ c-2 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? (Round your answer to 2 decimal places. (e.g., 32.16)) Maximum monthly charge $

Reference no: EM131070693

Questions Cloud

Examine how company in industry does their accounting : The accounting systems paper can take one of two approaches. For whichever industry you chose either find a software accounting system or examine how a company in the industry does their accounting. Generally it is easier to find a software for the i..

Analyzed their customer and order handling data : Wizard Corporation has analyzed their customer and order handling data for the past year and has determined the following costs: Order processing cost per order $7 Additional costs if order must be expedited (rushed) $8.00 Customer technical support ..

Assuming no taxes-how much will your stock be worth : Your portfolio is 300 shares of Davis, Inc. The stock currently sells for $100 per share. The company has announced a dividend of $3.10 per share with an ex-dividend date of April 19. Assuming no taxes, how much will your stock be worth on April 19?

Result of implementing the lockbox system : 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..

Calculate the operating cash flow for the year : Tubby Toys estimates that its new line of rubber ducks will generate sales of $7.60 million, operating costs of $4.60 million, and a depreciation expense of $1.60 million. Assume the tax rate is 35%. Calculate the operating cash flow for the year by ..

What will be the effect on profit of accepting the order : PowerDrive, Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25,000 drives in the prior year was: Direct material $625,000 Direct labor 375,000 Variable overhead 125,000 Fixed overhead 1,500,000 Total cost $2,625,00..

Bond issue outstanding with maturity : IBM has a bond issue outstanding with 14 years to maturity. When originally issued the bond had a par value of $1,000, a stated coupon rate of 12% and 15 years to maturity. Currently, similar risk bonds in the market place are yielding 8%. What would..

What is the discount being offered : You place an order for 390 units of inventory at a unit price of $180. The supplier offers terms of 3/15, net 60. a-1 How long do you have to pay before the account is overdue? Days until overdue days a-2 If you take the full period, how much should ..

User Account

All Pages