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Poutine Cheez Company has yearly sales of $550,000 and an average collection period of 35 days. A factoring company is offering a 35-day receivables loan
Poutine Cheez Company has yearly sales of $550,000 and an average collection period of 35 days. A factoring company is offering a 35-day receivables loan equal to 85% of the accounts receivable at 9% along with a commission fee of .45% of the receivables. The firm estimates that by taking the offer, it could save $300 in collection costs and a full half of one percent in bad debt costs, as a percentage of sales. What is the annual cost (in percent) of the arrangement to Poutine Cheez? Please note that it is in PERCENT! The answer is 1.417%, I need to know how they got this answer. If this can be done with financial calculator please include inputs. Do not reply with another answer please
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