A factor has agreed to lend the JVC Corporation working capital on the following terms: JVC’s receivables average $ 100,000 per month and have a 90- day average collection period. The factor will charge 12 percent interest on any advance (1 percent per month paid in advance) and a 2 percent processing fee on all receivables factored and will maintain a 20 percent reserve. If JVC undertakes the loan, it will reduce its own credit department expenses by $ 2,000 per month. What is the annual effective rate of interest to JVC on the factoring arrangement? Assume that the maximum advance is taken.
Answer to relevant QuestionsThe final stage in the interview process for an assistant financial analyst at Caledonia Products involves a test of your understanding of basic financial concepts. You are given the following memorandum and asked to respond ...Identify each of the following sources of short- term credit in terms of whether they are secured (include some type of collateral) or are unsecured: •Line of credit •Pledging of accounts receivable. •Trade credit. ...The Sean- Janeow Import Co. needs $ 500,000 for the 3- month period ending September 30, 2013. The firm has explored two possible sources of credit. a. S- J has arranged with its bank for a $ 500,000 loan secured by its ...What is meant by (a) Exchange risk and (b) Political risk? This morning, you noticed the following information in your financial newspaper: 1 British po3und = 103.25 yen (JPY) 1 U. S. dollar = 81.23 yen 1 U. S. dollar = 0.77 euros Given this information, how many euros did the ...
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