Reference no: EM132642374

Charming Paper Company sells to the 12 accounts listed here.

Account Receivable Balance     Outstanding Average Age of the Account            Over the Last Year

A                                                $ 60,000                                                          28

B                                                   120,000                                                           43

C                                                    70,000                                                              10

D                                                       20,000                                                          52

E                                                         50,000                                                          42

F                                                        220,000                                                           34

G                                                            30,000                                                        16

H                                                                300,000                                                   65

I                                                                    40,000                                                  33

J                                                                       90,000                                             50

K                                                                       210,000                                           14

L                                                                           60,000                                            35

Capital Financial Corporation will lend 90 percent against account balances that have averaged 30 days or less, 80 percent for account balances between 31 and 40 days, and 70 percent for account balances between 41 and 45 days. Customers that take over 45 days to pay their bills are not considered acceptable accounts for a loan.

The current prime rate is 8.50 percent, and Capital charges 3.50 percent over prime to Charming as its annual loan rate.

Question a. Determine the maximum loan for which Charming Paper Company could qualify

Question b. Determine how much one month's interest expense would be on the loan balance determined in part a. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)