Jones Inc

Jones Inc. feels that a lockbox system can shorten its accounts receivable
collection period by 2 days. Credit sales are $5,000,000 per year, billed on a continuous
basis. The firm has other equally risky investments with a return of 15%. The cost of the
lockbox system is $8,500 per year. (Note: Assume a 365-day year.)

a. What amount of cash will be made available for other uses under the lockbox system?

b. What net benefit (cost) will the firm realize if it adopts the lockbox system?

c. Should it adopt the proposed lockbox system?