Suppose Sio Inc. has 60 days of accounts receivable (AR) of $900,000 on its books. A factor offers a 60-day AR loan equal to 90 percent of AR. The quoted interest rate is 8 percent, and there is a commission fee of 0.5 percent. The factoring will result in a reduction of $10,000 in bad debt losses. What is the effective annual cost?
Answer to relevant QuestionsDescribe why financial and market intermediaries exist in our financial system.Suppose Janice obtains only $93,000 when she sells all the assets of the firm described in Practice Problem 18. How much money would the debt holders receive if the business were a corporation? If it were a sole ...Summarize the main characteristics of corporations. What is the effective annual cost if a firm issues $2.5 million face value of 90-day commercial paper for net proceeds of $2,450,000? The firm pays a standby fee of 0.05 percent on the face value.What is the effective annual cost if a firm issues $10 million of 180-day BAs at a quoted rate of 6.5 percent, and the bank charges it a 0.5 percent stamping fee? Compare the effective annual cost of 180-day commercial paper ...
Post your question