Mountain Top Inc

question 20

Multiple Choice

Mountain top Inc. can reduce its collection time by one day if it installs a lockbox system at a cost of $2,200 a year plus $.52 per transaction. The inn receives an average of 136 payments per day with an average payment of $7,980 each. The interest rate on money market securities is 3.98 percent. Assume a year has 365 days. What is the NPV of the lockbox system?

• A) $156,727
• B) $368,654
• C) $274,208
• D) $421,730
• E) $226,203

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Definitions:

Expansionary Gap

A situation where the actual output in an economy is higher than the potential output, often leading to inflation.

Potential GDP

The maximum output an economy can achieve when all resources are used efficiently and effectively, without causing inflation.

Cost-Push Inflation

Inflation that occurs when the prices of inputs such as labor and raw materials go up, causing a reduction in the supply of these products.

Expansionary Gap

A condition where an economy's real GDP exceeds its potential GDP, leading to inflationary pressures.