Compute the cost of the sources of funds

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Kyle Corporation needs P150,000 to funds its increasing sales demand. The company purchased the goods on account on terms of 5/10, n/30. The company has three alternative sources funds as follows;

The company paid on discount period and use their revolving fund as payment of accounts payable in which it has an opportunity cost of 30%. 

Bank Loan; The firm's bank will lend P250,000 at 18%. A 10% compensating balance will be required.

Factor the account receivable of P150,000 per month, which the term of sale is 3/10 n/30. The factor will advance 75% of the face value of receivable at 15% on an annual basis. The factor also charge 2% fee on all receivable purchased.

Question 1: Compute the cost of the above sources of funds.

Question 2: Among the three alternatives; which alternative have a lowest cost?

Reference no: EM132577252

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