A firm sells its accounts receivables to a factor at a 1.5% discount. The average collection period

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A firm sells its accounts receivables to a factor at a 1.5% discount. The average collection period is 1 month. What is the implicit effective annual interest rate on the factoring arrangement? Suppose the month average collection period is 1.5 months. How does this affect the average implicit effective annual interest rate?

A firm sells its accounts receivables to a factor at


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Fundamentals of Corporate Finance

ISBN: 978-0078034640

7th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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