How Much Money Can Be Saved Annually by Setting Up

question 24

Multiple Choice

How much money can be saved annually by setting up a lock-box system that will process 500 checks per day at a cost of $0.15 per check if each check averages $220,collection float is reduced by 3 days,and the annual interest rate is 8%? (Use a 365-day year.)

• A) −$2,125
• B) −$975
• C) $2,650
• D) $26,325

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Definitions:

Lump Sum

A lump sum is a single payment of money, as opposed to making payments over time in installments.

Interest Rate

The portion of a loan that accrues interest, regularly described as an annual percentage of the loan’s remaining debt.