How Much Time Must Be Saved to Justify a Lock-Box

question 112

Multiple Choice

How much time must be saved to justify a lock-box system that processes 350 cheques per day at an average amount of $400 per cheque if the system will cost $20,000 annually and interest rates average 8 percent?

• A)0.56 days
• B)1.79 days
• C)2.14 days
• D)7.00 days break-even point for system = $20,000/.08 = $250,000
• Thus, the system must reduce collection float by $250,000.
• 300 cheques x $400 per cheque x days saved = $250,000

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