Amed Corp has annual sales of $400,000 and an average collection period of 38 days. • A factoring company is offering a 38-day receivables loan equal to 80% of the accounts receivable at 8% interest along with a commission fee of 0.8% of the receivables. • The firm estimates that by taking the offer, it could save $200 in collection costs and 0.75% in bad debt costs, as a percentage of sales. What is the effective annual cost (in percent) of the arrangement to Amed Corp? ( Assume 365 days in one year. Do not use the % sign. If your answer is 123.45%, then enter 123.45. Use four decimal points in your answer)

Amed Corp has annual sales of $400,000 and an average collection period of 38 days. • A factoring company is offering a 38-day receivables loan equal to 80% of the accounts receivable at 8% interest along with a commission fee of 0.8% of the receivables. • The firm estimates that by taking the offer, it could save $200 in collection costs and 0.75% in bad debt costs, as a percentage of sales. What is the effective annual cost (in percent) of the arrangement to Amed Corp? ( Assume 365 days in one year. Do not use the % sign. If your answer is 123.45%, then enter 123.45. Use four decimal points in your answer)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 2MC

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