You Are Considering Implementing a Lockbox System for Your Firm

question 12

Multiple Choice

You are considering implementing a lockbox system for your firm.The system is expected to reduce the average collection time by 2.8 days.On an average day,your firm receives 2,419 checks with an average value of $1,287 each.The daily interest rate on Treasury bills is 0.016 percent.The bank charge per check is $0.30.What is the net present value of this lockbox arrangement?

• A)-$4,535,625
• B)-$2,611,575
• C)$187,419
• D)$4,181,483
• E)$13,252,733

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Definitions:

Price/Pound

The cost of a product or commodity per pound, used as a measure for pricing in various markets.

Holt-Winters Multiplicative Model

A forecasting technique that accounts for trends and seasonal variations in time series data, using a multiplicative approach to model the seasonal component.

Trend

A pattern or direction in data, often over time, indicating a movement or change in variables, which can be upward, downward, or steady in financial and scientific analyses.

Seasonality

Patterns or variations that occur in data at specific regular intervals less than a year, often due to weather, holidays, or other cyclical events.