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LoDo Tiles Inc. is considering factoring its receivables. The company s average collection period is 5 5 days, and its average level of receivables is
LoDo Tiles Inc. is considering factoring its receivables. The companys average collection period is days, and its average level of receivables is $ The factor has indicated that it requires a reserve for returns and allowances, and charges a factoring commission, with the commission to be paid up front. The factor will advance LoDo Tiles funds at percentage points over the prime lending rate, which is currently Interest is to be paid up front. Determine the effective annual rate of the factoring. Assume days in a year.
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