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Part 1

FloatSimon Corporation has daily cash receipts of

$64,000.

A recent analysis of its collections indicated that customers' payments were in the mail an average of

2.5

days. Once received, the payments are processed in

3

days. After payments are deposited, it takes an average of

3

days for these receipts to clear the banking system.

a.How much collection float (in days) does the firm currently have?

b.If the firm's opportunity cost is

11%,

would it be economically advisable for the firm to pay an annual fee of

$16,800

for a lockbox system to reduce collection float by

4

days?c. What would the company's opportunity cost have to be to make the

$16,800

fee worthwhile?

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Part 1

a.The amount of collection float (in days) the firm currently has is

enter your response here

days.(Round to one decimal place.)

Part 2

b.The cost savings if the firm adopts the lockbox system is

$enter your response here.

(Round to the nearest dollar.)

Part 3

Would it be economically advisable for the firm to pay an annual fee of

$16,800

to reduce collection float by

4

days?The firm

should

should not

accept the proposal because the savings is

greater

less

than the costs.(Select from the drop-down menus.)

Part 4

c. To make the

$16,800

fee worthwhile, the company's opportunity cost would have to be

enter your response here%.

(Round to two decimal places.)

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