Question: Sunny Coast Enterprises has been approached by a factor that offers to purchase the Hong Kong Media Imports receivable at a 16% per annum discount

Sunny Coast Enterprises has been approached by a factor that offers to purchase the Hong Kong Media Imports receivable at a 16% per annum discount plus a 2% charge for a non-recourse clause.

a. What is the annualized percentage all-in-cost of this factoring alternative?

b. What are the advantages and disadvantages of the factoring alternative compared to the alternatives in Sunny Coast Enterprises (A)?

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