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The factoring department of Garcia Bank is processing 100,000 invoices per year with average invoice value of $1,500. Garcia bank buys the accounts receivable at
The factoring department of Garcia Bank is processing 100,000 invoices per year with average invoice value of $1,500. Garcia bank buys the accounts receivable at 4% off the invoice value. The average collection period is 30 days. Currently 2% of the accounts receivable turns out to be bad debt. The annual interest rate is 10%. The annual operating expense of this department is $400,000.
What is the gross profit before interest and tax for the factoring department of Garcia bank.
The fees received for factoring is 0.
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