Drugs R Us Operate A Mail Order Pharmaceutical Business In San Fran The Firm Rec

7.2. Drugs ‘r Us operate a mail-order pharmaceutical business in San Fran. The firm receives an average of $325,000 in payment per day. On average, it takes 4 days from the time customer mail their check until their firm receives them. The company is considering establish a lockbox system, in which customers’ payments would be sent to nearby (local) banks instead of directly to San Fran. Banks in the lockbox locations would then wire the daily receipts to a single (concentration) bank.The lockbox system, which would consist of ten local depository banks and a concentration bank, would cost Drugs ‘r Us $6,500 per month. Under this system, customers’ checks would be received at the lockbox locations one day after they are mailed, and the daily total would be wired to the concentration bank at a cost of $9.75 each.Assume that the firm could earn 10% on short-term investments and that there are 260 working days and hence 260 transfers from each lockbox location per year.a.What is the total annual cost of operating the lockbox system?

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