Your firm has an average collection period of 31 days. Current practice is to factor all receivables

Question:

Your firm has an average collection period of 31 days. Current practice is to factor all receivables immediately at a discount of 1.25 percent. What is the effective cost of borrowing in this case? Assume that default is extremely unlikely.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For answer-question

Fundamentals of Corporate Finance

ISBN: 978-1260153590

12th edition

Authors: Stephen M. Ross, Randolph W Westerfield, Robert R. Dockson, Bradford D Jordan

See More Books

Question Posted: Jul 17, 2019 11:55 AM

See More Questions

The Torrey Pine Corporations purchases from suppliers in a quarter are equal to 75 percent of the next quarters forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 20...
In exchange for a $300 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.85 percent per quarter on any funds actually borrowed. 2. Maintain a 4.5 percent...
No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $4.5 million in collections per day and requires a $340,000 compensating balance. No More Books is contemplating...
A car is randomly selected at a traffic safety checkpoint, and the car has 6 cylinders. Determine whether the given values are from a discrete or continuous data set.
Prove or disprove that this is a vector space: the real-valued functions f of one real variable such that f(7) = 0.
In Exercises 9293, rewrite the equation in terms of base e. Express the answer in terms of a natural logarithm and then round to three decimal places. y = 73(2.6) x
Why does collusion pose unique prevention and detection challenges?
Rondello Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials1 pound plastic at $7.00 per pound ...... $ 7.00 Direct labor1.5 hours at...
At the Natural History Museum, tickets cost $10 for adults and $6 for kids under 12. What would be the total cost for 12 adult tickets and 18 kids tickets? What would be the total cost for a adult...
You have identified relevant controls for several assertions within the revenue cycle, and you must use IDEA to perform several tests of controls. Required: a. ELM has a policy of using pre numbered...
Coris Corp. has an equity value of $13,315. Long-term debt is $8,200. Net working capital, other than cash, is $2,750. Fixed assets are $17,380. How much cash does the company have? If current...
The following is the sales budget for Profit, Inc., for the first quarter of 2018: Credit sales are collected as follows: 65 percent in the month of the sale 20 percent in the month after the sale 15...
Consumer expenditures on safety are thought to have positive income elasticity. For example, as incomes rise, people tend to buy safer cars (larger cars with side air bags), they are more likely to...
Write a program that asks the user to input a string that ends with a period and where the words are separated by a space. Your program should consist of a function that will return a new string in...
Housebuilt Manufacturers Pty Ltd is a large company that produces tile products. The company's average turnover for the last three tax years is $12 million. On 1 June 2022, it incurs $120,000 in...
Solve for the unknown interest rate in each of the following (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.): Interest Rate Present...
Background: The Law firm Piazza & Grace ('P&G'), is a boutique firm specializing in plaintiffs' civil litigation located in Bethesda, Maryland. The second law firm, The Legal Defense Team ('TLDT') is...
using the pic attached, answer: 1. Which share of financial assets (Bank 1, bank 2 or bank 3) is more risky. 2. If you are an investor and you have $300,000 for the period of 30 months and decide to...
Napa Tours Co. is a travel agency. The nine transactions recorded by Napa Tours during April 2018, its first month of operations, are indicated in the following T accounts: Indicate for each debit...
General Electric Capital, a division of General Electric, uses long-term debt extensively. In a recent year, GE Capital issued $11 billion in long-term debt to investors, then within days filed legal...
Short-term investments for each if the short-term marketable securities given here provide an example of the potential disadvantages the investment has for meeting a corporations cash management...
Agency issues It is sometimes argued that excess cash held by a firm can aggravate agency problems and, more generally, reduce incentives for shareholder wealth maximization how would you frame the...
Agency issues It is sometimes argued that excess cash held by a firm can aggravate agency problems and, more generally, reduce incentives for shareholder wealth maximization how would you frame the...
A shop has implemented a new coupon discount program for its customers. Employees could be scanning coupons but charging the customers full price and then pocketing the difference.) explain,construe...
In 2014, the cost of the most frequently bough consumer goods was 2.364 times higher than in 1982 (the CPI in 2014 was 236.4), and in 2015, the cost of this basket of goods was 2.378 times higher...
Your friend is a hedge fund manager. He tells you that he has earned 6% returns on average above the S&P 500 return over the past five years, so he doesnt believe in efficient market. Do you agree...

Your firm has an average collection period of 31 days. Current practice is to factor all receivables

Question:

Step by Step Answer:

If we factor immediately we receive cash an average ...View the full answer

Fundamentals of Corporate Finance

Students also viewed these Business questions