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Accounts receivable as a form of financing

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Reference no: EM132494925

You are currently negotiating with a customer for a large custom furniture order. They will either pay you a lump sum of $200,000 now, or payments of $50,000 per year for the next 5 years (the first payment will be one year from today).

  • Assuming a 5% discount rate, which option is worth more in today's dollars?
  • If you choose the payments option, explain how you can use factoring of the related accounts receivable as a form of financing. Under what circumstances might you consider doing this?

Reference no: EM132494925

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