The Siskiyou Manufacturing Company will collect an estimated $12,000,000 next year; and it will
receive an estimated 20,000 checks.
Siskiyou's bank has offered to set up a lock-box system that will
reduce float time by 4.5 days. The cost of the system will be $.15 per check. What is the minimum
annual interest rate on its cash balance that Siskiyou should receive before it would be willing to
adopt the lock-box system?
A) 3.25% B) 1.07% C) 1.82% D) 2.03%
D
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