Your firm has expected annual sales of ($2.0) million, and has been offered a merchant cash advance

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Your firm has expected annual sales of $$2.0$ million, and has been offered a merchant cash advance of $$440,000$ with a factor rate of 1.25 and a holdback rate of 20%.

a. When do you expect the loan will be repaid, expressed in days?

b. What is the implied interest rate on the loan, expressed as an APR with daily compounding?

c. Suppose you are able to renegotiate the holdback rate to 15%. What is the implied interest rate now?

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Corporate Finance

ISBN: 9781292446318

6th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

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Question Posted: Apr 04, 2024 11:00 PM

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Your firm has expected annual sales of ($2.0) million, and has been offered a merchant cash advance

Question:

Step by Step Answer:

a To determine when the loan will be repaid we need to calculate the total repayment amount and then divide it by the daily payment amount Given Expected annual sales 20 million Merchant cash advance ...View the full answer

Corporate Finance

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