Arshadi Wineries Is Considering the Purchase of Lockbox Services from Bob's

question 12

Multiple Choice

Arshadi Wineries is considering the purchase of lockbox services from Bob's Bank. Currently, it takes six days to collect funds from customers; this would be reduced by two days with the lockbox system. The average number of payments received per day is 300 and the average cheque size is $150. Bob's will charge 5' per cheque in return for operating the lockbox system. Assume one-year T-bills yield 5%, and use a 360-day year.

What is the maximum acceptable cost per cheque that Arshadi Wineries could pay and still find the system acceptable?

• A) 2.5'
• B) 3.0'
• C) 3.5'
• D) 4.0'
• E) 4.5'