The MC Donald Company can convert to ACH disbursing for $20,000. McDonald averages a perpetual 500 checks per month and has an annual cost of capital of 10%. If ACH disbursing will save McDonald's 20 cents per payment, what is the NPV of the decision to convert to ACH? What is the minimum number of payments per month in order to justify the cost to convert to ACH disbursing?
Savings per payment = $0.20
Number of checks per month = 500
Savings per month = 500*0.20=$100
Annual savings = ...
This solution shows step-by-step calculations to determine the Net Present Value (NPV) and also the minimum number of payments per month to break even with the cost to convert to ACH disbursing.