Business, 02.04.2020 02:37 miklin4677

It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutters 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 $133,000 and the required rate of return is 5 percent per year. Assume 365 days per year.

1. What is the reduction in outstanding cash balances as a result of implementing the lockbox system?

Cash balance reduction=$?

2. What is the daily dollar return that could be earned on these savings? (round your answer to 2 decimal places. (e. g 32.16))

Dollar return= $?

3. What is the maximum monthly charge cookie cutter should pay for this lockbox system if the payment is due at the end of the month? (round your answers to 2 decimal places. (e. g. 32.16))

Maximum monthly charge= $?

4. What is the maximum monthly charge cookie cutter should pay for this lockbox system if the payment is due at the beginning of the month? (round your answer to 2 decimal places (e. g.32.16))

Maximum monthly charge= $?

Please show all work and label each answer as following:

Cash balance reduction= $?

Dollar return=$?

Maximum monthly charge end of each month= $?

Maximum monthly charge beginning of the month= $?

Answers: 2

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