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Suppose Sio Inc. has 45 days of accounts receivable (AR) of $900,000 on its books. A factor offers a 45-day AR loan equal to 90
Suppose Sio Inc. has 45 days of accounts receivable (AR) of $900,000 on its books. A factor offers a 45-day AR loan equal to 90 percent of AR. The quoted interest rate is 6 percent, and there is a commission fee of 0.5 percent. The factoring will result in a reduction of $8,000 in bad debt losses. What is the effective annual cost?
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