Purchase Solution

Calculate the Cost and Savings of a Lockbox System for Eagle Industries

Not what you're looking for?

Ask Custom Question

P13-14 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 with 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?

Purchase this Solution
Solution Summary

This solutions provides the calculations and answers for the cost and savings of a lockbox system for Eagle Industries.

Solution Preview

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 ...

Purchase this Solution
Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

View More Free Quizzes
Related BrainMass Solutions

  • Computing cash available and net benefit to system

    The firm has other equally risky investments with 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.

  • Key Data Regarding Finance Questions

    The firm has other equally risky investments with 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.

  • Lockbox system for accounts receivable

    (a) Calculate the cash conversion cycle before and after the lockbox system. (b) Calculate the savings in financing costs from the lockbox system. (a) Calculate the cash conversion cycle before and after the lockbox system.

  • Linkup Systems

    Since savings is greater than cost of the lock box, it should be installed.

  • Lockbox system- Penn Steelworks

    158372 Lockbox system- Penn Steelworks Penn Steelworks A) What is the opportunity cost to Penn Steelworks of the funds tied up in mailing and processing? Use a 365-day year.

  • Adopting a Lock box system

    Interest savings=$1320000*6%= $79200 Let Number of days in year=365 Daily Costs=Variable lockbox fee*Average number of payments=0.35*600=$210 Annual Variable Cost of operating lockbox system=365*210=$76650 Annual Interest saving is more than

  • Working Capital Management

    A lockbox system that consists of ten local depository banks and a concentration bank in San Francisco would cost $6,500 per month.

  • Finance questions

    (a) Calculate the cash conversion cycle before and after the lockbox system. (b) Calculate the savings in financing costs from the lockbox system. 5.

  • Amount of funds released by the lockbox arrangement

    439963 Management of Cash and Marketable Securities for J-Mart's lockbox system J-Mart, a nationwide department store chain,processes all its credit sales payments at its suburban Detroit headquarters.

View More Related Solutions