Michael’s Computers is evaluating proposals from two different factors who will provide receivables financing. Big Fee Factoring will finance the receivables at an APR of 8 percent, discounted, and charges a fee of 4 percent. HighRate Factoring offers an APR of 14% (non-discounted) with fees of 2 percent. The average term of either loan is expected to be 35 days. With an average receivables balance of $250,000, which proposal should Michael’s accept?
Answer to relevant QuestionsMichael’s Computers’ local bank offers the firm a 12-month revolving credit agreement of $500,000. The APR of the revolver is 12 percent with a commitment fee of 0.5% on the unused portion. Over the course of a year, ...Which of the following offer the lowest effective rate for Wolf Howl jackets? Assume Wolf Howl will need to borrow $800,000 for 180 days. a. A 14% APR bank loan b. A 13% APR, discounted bank loan. c. 12.5% APR with fees of ...Describe the term “profitability index” and explain how it is used to compare projects. What is a way to keep managers accountable for their capital budgeting forecasts and estimates? Compute operating cash flows for the following: a. A project that is expected to have sales of $10,000, expenses of $5,000, depreciation of $200, an investment of $50 in net working capital and a 20 percent tax rate. b. A ...
Post your question