ckust08
Dec 14, 2007, 10:11 AM
A firm has a daily average collection of checks equal to $250,000. It takes the firm approximately 5 days to convert the funds into cash. Assume a lock-box system could be employed which would reduce the cash conversion procedure to 1 and 1/2 days and the firm could invest an additional cash received at 6 percent after taxes. Would the lock box system be a good buy if it costs $23,000 per year?