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Poutine Cheez Company has yearly sales of $410,000 and an average collection period of 30 days. A factoring company is offering a 30-day receivables loan
Poutine Cheez Company has yearly sales of $410,000 and an average collection period of 30 days. A factoring company is offering a 30-day receivables loan equal to 84% of the accounts receivable at 6.5% along with a commission fee of 0.75% of the receivables. The firm estimates that by taking the offer, it could save $150 in collection costs and 0.5% in bad debt costs, as a percentage of sales. What is the annual savings (in $ terms) of the arrangement to Poutine Cheez? (Do not enter the $ sign. If your answer is $1,234.56, then enter 1234.56)
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