Homework Answers
Net Present Value = (Daily Payments * Average Cheque size * Reduction of collection time) - ((Daily Payments*Processing Fee per cheque)/(APR/365)
=> (2131*53*2) - ((2131*0.01)/(2.98%/365) = 225886 - 261012 = -ve 35126
Answer : NPV of adopting this Lockbox is - $ 35126
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firm’s collection times. It is expected that the lockbox system
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4 percent per year. Assume 365 days per year.
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1. What is Webb
Corporation’s total net cash flow available from the current
lockbox system to meet payroll?
2. Under the terms outlined by Third National Bank,
should the company proceed with the concentration banking
system?
3. What cost of ACH transfers would make the company
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It takes Cookie Cutter Modular Homes, Inc.,
about six days to receive and deposit checks from customers. The
company’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 $175,000, and the required rate of return is
4 percent per year. Assume 365 days per year.
It takes Cookie Cutter Modular Homes, Inc., about six days to...
1. What is Webb
Corporation’s total net cash flow available from the current
lockbox system to meet payroll?
2. Under the terms outlined by Third National Bank,
should the company proceed with the concentration banking
system?
3. What cost of ACH transfers would make the company
indifferent between the two systems?
yielding 4 percent per year, and there are 365 days per year. MINICASE Cash Management at Webb Corporation Webb Corporation was founded 20 years ago by its president, Bryan...
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