To find the NPV of taking the lockbox, we first need to calculate the present value of the

savings.
The present value of the savings will be the reduction in collection time times the average
daily collections, therefore:
PV = 2(600)($1,100)
PV = $1,320,000
The daily interest rate is:
Daily interest rate = 1.0601/365 1
Daily interest rate = .000160 or .0160% per day
The transaction costs would represent a perpetuity. The cost per day is the cost per
transaction times the number of transactions per day, so the NPV of taking the lockbox is:
NPV = $1,320,000 [$0.35(600)/.00016]
NPV = $4,652.17
Without the fixed charge, the lockbox system should be accepted. To calculate the NPV
of the lockbox with the fixed charge, we can simply use the NPV of the lockbox without
the fixed charge and subtract the additional cost. The fixed charge is a perpetuity, so, with
the fixed charge, the NPV of taking the lockbox is:
NPV = $4,652.17 [$1,000/.06]
NPV = $12,014.50
Since the NPV is negative, then the lockbox system should not be accepted if there was a
fixed charge of $1,000.