Suppose Sio Inc. has 60 days of accounts receivable (AR) of $900,000 on its books. A factor

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Suppose Sio Inc. has 60 days of (AR) of $900,000 on its books. A factor offers a 60-day AR loan equal to 90 percent of AR. The quoted interest rate is 8 percent, and there is a commission fee of 0.5 percent. The factoring will result in a reduction of $10,000 in bad debt losses. What is the effective annual cost?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...

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Introduction To Corporate Finance

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Authors: Laurence Booth, Sean Cleary

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Question Posted: Feb 25, 2015 10:21 AM

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Suppose Sio Inc. has 60 days of accounts receivable (AR) of $900,000 on its books. A factor

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Loan amount 900000 90 810000 Commission ...View the full answer

Introduction To Corporate Finance

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