Howton Mining Expects to Have Credit Sales of $8,000,000 This

question 178

Essay

Howton Mining expects to have credit sales of $8,000,000 this year.First National Bank is offering Howton Mining a lock-box system for $1,200 per month.Howton Mining estimates that the new lock-box system will reduce float by 4.5 days.What rate of return must Howton Mining earn on its marketable securities to make it worthwhile for the company to institute this lock-box system? Use a 365-day year.

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Definitions:

Refrigerator

An appliance used for keeping food and drinks cold.

Fed

An abbreviation often referring to the Federal Reserve System, which is the central banking system of the United States.

Conditional Response

A learned response that becomes associated with a previously unrelated stimulus as a result of conditioning.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired: a response that is at first elicited only by the second stimulus is eventually elicited by the first stimulus alone.