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A company with most of its customers in New York, has decided to consider using a lock box to help improve it's cash flow. The bank has indicated it will be able to reduce the company's collection float by 3 days. Given the following details should the lock box option be used
? Average number of payments per day in new York is 150
? Average value of each payment is $15,000
? Fixed annual lock box fee is $80,000
? Transactional fee for lock box use is $.50 per payment
? Money market Investment has a interest rate of 7.5%

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Solution Summary

The lock box option is evaluated- cost of lock box against the interest on freed cash.

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A company with most of its customers in New York, has decided to consider using a lock box to help improve it's cash flow.  The bank has indicated it will be able to reduce the company's collection float by 3 days.  Given the following details should the lock box option be ...

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