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 book-img-for-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.
Abstract...
These questions require answers that are beyond the material that is covered in this chapter. Select one of the expenses that is deductible from adjusted gross income. Present an argument about why...
Roy Newburn borrowed money and bought a $49,000 truck from Treadwell Ford. A few months later, the truck developed transmission problems. Newburn learned that the truck had 170,000 more miles on it...
P10-3A on January 1, 2014, Evers Company purchased the following two machines for Compute depreciation under use in its production process. different methods Machine A: The cash price of this machine...
The graph reflects the monitoring of dissolved oxygen concentrations at six stations along a river. The stations are located 20 m apart, with A the farthest upstream and F the farthest downstream....
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...
Air pollutants frequently cause acid rain. A measure of the acidity is pH, which ranges between 1 and 14. Pure water is neutral and has a pH of 7. Acidic solutions have a pH less than 7, whereas...
1. A corn farmer has observed the following distribution for the number of ears of corn per cornstalk. Ears of Corn Probability 1 2 3 4 .3 .4 .2 .1 Part A: How many ears of corn does he expect on...
1. A mass m on a vertical spring with force constant k has an amplitude of A. Using the top of the motion as the origin for both gravitational potential energy and spring potential energy: (a) Find...
2. Consider the PDE Utt - Uxx + Ut - Ux = 0 (1) for < < and 0
On April 1, 2024, Chardonnay pays an insurance company $12,480 for a two- year fire insurance policy. The entire $12,480 is debited to Prepaid Insurance at the time of the purchase. Record the...
Which retailer(s) should represent and sell your product?Why?In terms of their range of distribution coverage, is your retailer intensive, selective and exclusive? Why is this aspect important to...
Specify the following queries in relational algebra on the database schema given in Exercise 5.14: a. List the Order# and Ship_date for all orders shipped from Warehouse# W2. b. List the WAREHOUSE...
Describe the general ways that the revised Form 990, applicable for tax year 2008 and beyond, is different from previous versions.
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...
Caspian Sea Drinks needs to raise $74.00 million by issuing additional shares of stock. If the market estimates CSD will pay a dividend of $2.69 next year, which will grow at 3.45% forever and the...
i need help in B and C Integrative Case 5-72 (Algo) Cost Estimation, CVP Analysis, and Decision Making (LO 5-4.5.9) Luke Corporation produces a variety of products, each within their own division....
Relate PSA (Public Securities Association) speed to the average life of a MBS. Describe the PSA measure and discuss which MBS would have the greater average life, one with a PSA of 100 or one with a...

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