Problem:
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter Modular Homes management is considering a lockbox system to reduce the firm's collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are $122,000, and the required rate of return is 5 percent per year. Assume 365 days per year.
Required:
Question 1: What is the daily dollar return that could be earned on these savings?
Note: Explain all steps comprehensively.