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1 August, 20:20

Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following: Average number of payments per day 380 Average value of payment $ 970 Variable lockbox fee (per transaction) $.40 Daily interest rate on money market securities. 068 % The total collection time will be reduced by four days if the lockbox system is adopted. a. What is the PV of adopting the system

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  1. 1 August, 20:26
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    PV of adopting the system = $1,474,400

    Explanation:

    As per the data given in the question,

    Average number of payments per day = 380

    Average value of payment = $ 970

    Variable lockbox fees = $.40

    Interest rate =.068%

    We can use following formula to calculate the required:

    PV of adopting the system = No. of days collection reduced * Average value of payment

    = 4 * 380 * 970

    =$1,474,400
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