Mountaintop Inns, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh, Pennsylvania. The bank has estimated that use of the system will reduce collection time by one day. In addition to the variable charge shown below, there is also a fixed charge of $4,320 per year for the lockbox system. Assume a year has 365 days. What is the NPV of the lockbox system given the following information?

Question

Quizplus · Accepted Answer

NPV = (1 F1F1F1S1F1F1F10 750 F1F1F1S1F1F1F10 $1,800) - [($0.30 F1F1F1S1F1F1F10 750)/(1.06^1/365 - 1)] - [$4,320/0.06] = -$131,301

Mountaintop Inns, a Kentucky Company, Has Determined That a Majority