A company is considering two proposals for lockboxes. In common to both are each lock box will have on average 400 checks per day with average value $200. In both offers the float is being reduce from 3 days to 1 day and in both offers there will be 3 lockboxes. The discount rate per year is 3.65% and per day is 3.65%/365 = .01%. Choice #1 bank charges $.0067 per check and $10 to transfer the funds from lockbox bank to the company’s bank. Choice #2 bank charges $.0041 per check and $10 to transfer the funds from lockbox bank to the company’s bank plus an annual fee of $400. Which is the better deal?
Choice #1 : NPV = $100,000
Choice #2: NPV= 120,000
Please show how answers are obtained.