The Zippo Corporation is considering factoring its receivables, which average $2 million (DSO=60 days). The factor charges a 3% commission and requires a 8% reserve for returns and allowances. It will advance funds at 2% over the prime, which is presently 7%. Credit dept. savings will be $1000 per month, and bad debt loss savings will be $4,000 per month.

Required? Compute the usable fund and annual financing cost.

- If the factoring is a recourse factoring

- If the factoring is non-recourse factoring