Paper Submarine Manufacturing Is Investigating a Lockbox System to Reduce

question 32

Multiple Choice

Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time.It has determined the following: $$\begin{array} { l l } \text { Average number of payments per day } & 300 \\\text { Average value of payment } & \$ 3,200 \\\text { Variable lockbox fees (per transaction) } & \$ 0.75 \\\text { Daily interest rate on money market securities } & 0.02 \text { percent }\end{array}$$ The total collection time will be reduced by 2 days if the lockbox system is adopted.What is the NPV of adopting the lockbox system?

• A)$600,000
• B)$675,000
• C)$695,000
• D)$745,000
• E)$795,000

---

Definitions:

Neurotic Needs

Ten irrational defenses against anxiety that become a permanent part of personality and that affect behavior.

Safety

The condition of being protected from or unlikely to cause danger, risk, or injury.

Exploitation

Taking unfair advantage of someone or a situation, often for personal gain, at the expense of others' welfare or rights.

Idealized Self-Image

For normal people, the self-image is an idealized picture of oneself built on a flexible, realistic assessment of one’s abilities. For neurotics, the self-image is based on an inflexible, unrealistic self-appraisal.