Price Mart Is Considering Outsourcing Its Billing Operations

question 55

Essay

Price Mart is considering outsourcing its billing operations.A consultant estimates that outsourcing should result in after-tax cash savings of $9,000 the first year,$15,000 for the next two years,and $18,000 for the next two years.Interest is at 12%.Assume cash flows occur at the end of the year.
Required: Calculate the total present value of the cash flows.

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Definitions:

Erroneously Charged

Incorrectly billed or wrongly demanded payment due to mistake or oversight.

Remittance Advice

A document sent by a customer to a seller, indicating that an invoice has been paid.

Running Cash Balance

The current amount of cash available in an account, changing with each transaction.

Company Check

A check written from a company's account, representing an official payment by the company to another party.