Financial Managment

(Cost of factoring) A factor has agreed to lend the JVC Corporation working capital on the following terms: JVC's receivables average $85,000 per month and have a 90-day average collection period. (Note that JVC's credit terms call for payment in 90 days, and accounts receivable average $255,000 because of the 90-day average collection period.) The factor will charge 16.80 percent interest on any advance (1.4 percent per month paid in advance) and a 3 percent processing fee on all receivables factored and will maintain a 22 percent reserve. If JVC undertakes the loan it will reduce its own credit department expenses by $1,900 per month. What is the annual effective rate of interest to JVC on the factoring arrangement? Assume that the maximum advance is taken Note Assume a 30-day month and 360 day year. If the maximum advance is taken the annual effective rate of interest would be [% (Round to two decimal places) Enter your answer in the answer box and then click Check Answer. All parts showing Clear All Check