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

question 365

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. Should Arshadi Wineries purchase the system?

• A) Yes, because the NPV is $63,000.
• B) Yes, because the NPV is $18,000.
• C) Since the NPV is zero, the firm is indifferent.
• D) No, because the NPV is -$18,000.
• E) No, because the NPV is -$63,000.

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Definitions:

Abnormal Behaviors

Actions or reactions that deviate significantly from what is considered typical or normal within a society or culture.

Moral Therapy

refers to a historical approach to mental illness that emphasized moral guidance and humane treatment in a supportive environment.

Decline

A gradual decrease in quality, quantity, or strength of something.

Ineffective

Lacking the ability or qualities to produce the intended or desired effect.