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Your firm has an average collection period of 31 days. Current practice is to factor all receivables immediately at a discount of 1.25 percent. Assume
Your firm has an average collection period of 31 days. Current practice is to factor all receivables immediately at a discount of 1.25 percent. Assume that default is extremely unlikely. What is the effective cost of borrowing in this case? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) NOTE: If we factor immediately, we receive cash an average of 31 days sooner. The number of periods in a year are: Number of periods (m) 365/31 Number of periods (m)-11.774193548 Hint: Use the EAR equation. Effective cost
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