Bavarian Brew Float
Bavarian Brew receives about 350 checks a day with an average check size of $550. Currently customer’s payments spend 2 days in the mail. Once a check is received it takes about 1.5 days to process it and another 4 days to clear the banking system. The firm’s opportunity cost is 10%. Assume a 365-day year.

-Bavarian Brew is contemplating implementing a lockbox system that would decrease the collection float by 2 days.What would be the most the company should be willing to pay on an annual basis for the system?

Question

Bavarian Brew Float
Bavarian Brew receives about 350 checks a day with an average check size of $550. Currently customer’s payments spend 2 days in the mail. Once a check is received it takes about 1.5 days to process it and another 4 days to clear the banking system. The firm’s opportunity cost is 10%. Assume a 365-day year.

-Bavarian Brew is contemplating implementing a lockbox system that would decrease the collection float by 2 days.What would be the most the company should be willing to pay on an annual basis for the system?

Quizplus · Accepted Answer

The Answer is C

Bavarian Brew Float Bavarian Brew Receives About 350 Checks a Day with an Day