This preview shows page 1. Sign up to view the full content.
Unformatted text preview: in why or why not. LG6 14–14 Lockbox system Eagle Industries feels that a lockbox system can shorten its
accounts receivable collection period by 3 days. Credit sales are $3,240,000 per
year, billed on a continuous basis. The firm has other equally risky investments
with a return of 15%. The cost of the lockbox system is $9,000 per year. LG4 632 PART 5 Short-Term Financial Decisions a. What amount of cash will be made available for other uses under the lockbox
b. What net benefit (cost) will the firm realize if it adopts the lockbox system?
Should it adopt the proposed lockbox system?
LG6 14–15 CHAPTER 14 CASE Zero-balance account Union Company is considering establishment of a zerobalance account. The firm currently maintains an average balance of $420,000 in
its disbursement account. As compensation to the bank for maintaining the zerobalance account, the firm will have to pay a monthly fee of $1,000 and maintain a
$300,000 non-interest-earning deposit in the bank. The firm currently has no
other deposits in the bank. Evaluate the proposed zero-balance account, an...
View Full Document