US CMA Part 2 · Chapter 4 · Question 3 of 15
A lockbox system would reduce Granger Corp.'s collection float by 2 days. Average daily collections are $150,000, freed funds can earn 6% per year, and the bank charges an annual fee of $12,000. What is the net annual benefit of the lockbox?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $6,000
Explanation
Funds released = 2 days x $150,000 = $300,000. Annual earnings on released funds = $300,000 x 6% = $18,000. Net benefit = $18,000 - $12,000 = $6,000. The released cash is a one-time balance, so only the return on it is an annual benefit.
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