What annual savings can Aqua System expect if the system is implemented?

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Aqua system Inc. expects to have $22,983,600 in credit sales during the coming year. Currently all checks are sent to the home office. A proposed lockbox system can eliminate 4 days of float, releasing funds which, when invested, will earn 9.84 percent per year. What annual savings can Aqua System expect if the system is implemented? Use a 365-day year.

Oct 5th, 2015

Thank you for the opportunity to help you with your question!

Credit Sales $22,983,600
Average Daily sales = $22,983,600/365 $62,969
Float 4 days
opportunity cost 9.84%
Annual savings = float reduction (days) x average daily receipts x opportunity cost
Annual savings = 4 days x $62,969 x 9.84% $24,784.51
Aqua system Inc. expects to have.xlsx

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Oct 6th, 2015

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