Arshadi Wineries is considering the purchase of lockbox services from Bob's Bank. Currently, it takes six days to collect funds from customers; this would be reduced by two days with the lockbox system. The average number of payments received per day is 300 and the average cheque size is $150. Bob's will charge 5'per cheque in return for operating the lockbox system. Assume one-year T-bills yield 5%, and use a 360-day year. Suppose one-year T-bills yield 6%. Should Arshadi Wineries purchase the system?
A) Yes, because the NPV is $54,000.
B) Yes, because the NPV is $28,000.
C) Since the NPV is zero, the firm is indifferent.
D) No, because the NPV is -$28,000.
E) No, because the NPV is -$54,000.
Correct Answer:
Verified
Q335: Arshadi Wineries is considering the purchase of
Q336: The target cash balance for a firm
Q337: Lockboxes:
A) Should be geographically located close to
Q338: Which of the following is true regarding
Q339: In the Miller-Orr model, _, the greater
Q341: Provide a definition for debit card.
Q342: Provide a definition for zero-balance account.
Q343: It would seem that float management for
Q344: The firm's desired cash level as determined
Q345: The immediate use, or same day value,
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents