Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 600 payments a day will be made to lock boxes with an average payment size of $2,000. The bank’s charge for operating the lock boxes is $.30 a check. The interest rate is .011% per day.
a-1. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.)
Daily interest saved $
a-2. Is it worthwhile to adopt the system?
Yes
No
b. What minimum reduction in the time to collect and process each check is needed to justify use of the lock-box system? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Minimum reduction in time days