Cross Collectibles Currently Fills Mail Orders from All Over S

question 39

Multiple Choice

Cross Collectibles currently fills mail orders from all over S.A.and receipts come in to headquarters in Cape Town.The firm's average accounts receivable (A/R) is R2.5 million and is financed by an 11 percent annual, simple interest bank loan.Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent.The annual cost of the system is R15,000.What is the estimated net annual savings to the firm from implementing the lockbox system?

• A) R500,000
• B) R30,000
• C) R60,000
• D) R55,000
• E) R40,000

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Exercise Equipment

Tools and machines designed for physical activities that improve fitness, such as treadmills, weights, and stationary bikes, used in both home and commercial gyms.

Loan

Borrowed money that is expected to be paid back in the future under predetermined terms.

Case Title

The official name or designation of a case as it appears in legal documents or court proceedings.