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Urgent! (C) GoodtoExport Sdn Bhd (G2Ex) of Malaysia currently has 60 foreign orders outstanding, with a typical order averaging at $18,000 due to be settled
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(C) GoodtoExport Sdn Bhd ("G2Ex) of Malaysia currently has 60 foreign orders outstanding, with a typical order averaging at $18,000 due to be settled in 45 days. G2Ex is considering the following two alternatives to protect itself against credit risk on these foreign orders: I Request a letter of credit. The cost would be 580 plus 0.75% of the invoice amount. To remain competitive. G2Ex would have to absorb the cost of the letter of credit: OR Factor the receivables. The factor would charge a nonrecourse fee of 1.20%. II. Assuming 360 days in a year, which alternative would you recommend to G2Ex? Why? (7 marks) Step by Step Solution
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