Whitmer Inc

question 68

Multiple Choice

Whitmer Inc.sells to customers all over the U.S. ,and all receipts come in to its headquarters in New York City.The firm's average accounts receivable balance is $2.5 million,and they are financed by a bank loan at an 7.50% annual interest rate.The firm is considering setting up a regional lockbox system to speed up collections,and it believes this would reduce receivables by 20%.If the annual cost of the system is $15,000,what pre-tax net annual savings would be realized?

• A) $25,650
• B) $21,825
• C) $22,500
• D) $24,300
• E) $20,250

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