Your Company Is Thinking of Installing a Lockbox System in Toronto

question 238

Multiple Choice

Your company is thinking of installing a lockbox system in Toronto to collect payments from the Western Provinces. The collection time is currently five days and would be reduced to three days if the system is installed. Daily interest on T-bills is.015%. The average number of daily payments is 650 and the average cheque size is $250. If the bank charges 6' per cheque, should the company get the lockbox?

• A) Yes, because the NPV is $97,500.
• B) Yes, because the NPV is $65,000.
• C) Since the NPV is zero, the firm is indifferent.
• D) No, because the NPV is -$65,000.
• E) No, because the NPV is -$97,500.

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Definitions:

Type A Behavior

A personality trait characterized by high levels of competitiveness, impatience, aggressiveness, and a constant sense of urgency.

Coronary Heart Disease

A condition characterized by reduced blood flow to the heart muscle due to build-up of plaque in the coronary arteries, leading to chest pain and potentially heart attacks.

Hostility

Exhibiting aggressive behavior or an unfriendly attitude towards others, often resulting from anger or a perceived threat, which can negatively impact interpersonal relationships.

Anger

A strong feeling of displeasure or antagonism towards something or someone, often manifesting in various emotional and physical responses.