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Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following: Average number of payments per day 380 Average value of payment $ 970 Variable lockbox fee (per transaction) $ .40 Daily interest rate on money market securities .068 % The total collection time will be reduced by four days if the lockbox system is adopted. a. What is the PV of adopting the system

Respuesta :

Answer:

PV of adopting the system = $1,474,400

Explanation:

As per the data given in the question,

Average number of payments per day = 380

Average value of payment = $ 970

Variable lockbox fees = $.40

Interest rate = .068%

We can use following formula to calculate the required :

PV of adopting the system = No. of days collection reduced × Average value of payment

= 4 × 380 × 970

=$1,474,400

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