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Lockbox system Eagle Industries feels that a lockbox system can shorten its accounts

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Question

P14-15 Lockbox system Eagle Industries feels that a lockbox system can shorten its accounts receivable collection period by 3 days. Credit sales are $3,240,000 per year, billed on a continuous basis. The firm has other equally risky investments that earn a return of 15%. The cost of the lockbox system is $9,000 per year. (Note: Assume a 365-day year.);a. What amount of cash will be made available for other uses under the lockbox system?;b. What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system?

 

Paper#30655 | Written in 18-Jul-2015

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