a. What is the total annual cost of operating the lockbox system?
b. What is the dollar benefit of the system to Drugs R Us?
c. Should the firm initiate the lockbox system?
a. What is the amount of free trade credit that Langley obtains from consolidated Services? ( assume 360 days per year throughout this problem)
b. What is the amount of costly trade credit?
c. What is the approximate annual cost of the costly trade credit?
d. Should Langley replace its trade credit with the bank loan? Explain your answer
e. If the bank loan is used, how much of the trade credit should be replaced?
a. What is the firms average collection period?
b. What is the firm’s current receivable balance?
c. What would be the firm’s new receivable balance if Milwaukee Surgical toughened up on its collection policy, with the result that all no discount customers paid on the 30th day?
d. Suppose that the firms cost of carrying receivable was 8 percent annually. How much would the toughened credit policy save the firms in annual receivables carrying expense? ( assume that the entire amount of receivables had to be financed)
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