What is the npv of the lockbox system

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Reference no: EM131559120

Bluegrass Beverages, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh, Pennsylvania. The bank has estimated that use of the system will reduce collection time by one day. In addition to the variable charge shown below, there is also a fixed charge of $4,320 per year for the lockbox system. Assume a year has 365 days. What is the NPV of the lockbox system given the following information?

Average number of payments per day 750

Average value of payments $1800

Variable lockbock fee (per transaction) $0.30

Annual interest rate on money market securities 6.0%

Reference no: EM131559120

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