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    Lock Box

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    A company with most of its customers in New York, has decided to consider using a lock box to help improve it's cash flow. The bank has indicated it will be able to reduce the company's collection float by 3 days. Given the following details should the lock box option be used
    ? Average number of payments per day in new York is 150
    ? Average value of each payment is $15,000
    ? Fixed annual lock box fee is $80,000
    ? Transactional fee for lock box use is $.50 per payment
    ? Money market Investment has a interest rate of 7.5%

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    https://brainmass.com/business/accounting/lock-box-169219

    Solution Preview

    A company with most of its customers in New York, has decided to consider using a lock box to help improve it's cash flow.  The bank has indicated it will be able to reduce the company's collection float by 3 days.  Given the following details should the lock box option be ...

    Solution Summary

    The lock box option is evaluated- cost of lock box against the interest on freed cash.

    $2.19

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