Interest calculations should be based on money you receive

Assignment Help Financial Management

Reference no: EM131319967

Business scenario: Your business does about $1.5 million in business, with sales equally spread throughout the year. Your average invoice size is about $26,000. You give all of your customers credit terms of Net 30 days, but most of your customers pay on 45 days. You need working capital to take on new orders, so you approach Slick Willy Factoring to get some cash. Slick Willy says that he will advance you 97% of the face value of any invoice. The customers will have to pay Slick Willy back the full amount of the invoice and he says he will charge you an additional 0.5% for each week that a customer is late in paying. Further, he will charge you $2,000 per month "standby" fee for his services plus a transaction fee of $150 for each invoice. Assuming you factor all of your receivables in the coming year, how much in total dollars will your financing arrangement with Slick Willy cost? How much will that be in terms of the interest rate you are paying on the funds you actually receive? Hint: Interest calculations should be based on the money you actually receive.

Reference no: EM131319967

Questions Cloud

What would be percentage change in the price of bond : Both Bond Huell and Bond Kuby have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Huell has six years to maturity, whereas Bond Kuby has 15 years to maturity. If interest rates suddenly rise by 2 percent, what is the p..

Municipal bond yields and taxable bond yields : If you are in the 35% tax bracket, would you prefer to invest in a municipal bond with a yield of 3.80% or a corporate bond with a yield of 4.72%. Explain. Also explain what the relationship between municipal bond yields and taxable bond yields is an..

Should state and federal homeland security grant money : Should state and federal homeland security grant money be distributed based upon population density? Why or why not? Explain.Should state and federal homeland security grant money be distributed based upon risk assessment? Why or why not? Explain.

Evaluate the potential effect of the chosen product safety : Choose one safety and one security risk, and identify relevant risk assessment techniques for your chosen safety or security risk. Evaluate the potential effect of the chosen product safety and security risks on your chosen company

Interest calculations should be based on money you receive : Your business does about $1.5 million in business, with sales equally spread throughout the year. Your average invoice size is about $26,000. You give all of your customers credit terms of Net 30 days, but most of your customers pay on 45 days. Assum..

Write a business plan for a car rental office in dubai : Write a Business Plan for a Car rental Office in dubai. Car Rental Business Plan - Publicity and Advertising Strategy. Car Rental Business Plan - Sustainability and Expansion Strategy.

Prepare to discuss your chosen organization : Correlate the applicable regulations to the types of risks that may be found in your organization. Base this correlation from your research of the industry you have chosen. Prepare to discuss your chosen organization during class discussions

How do you measure the effectiveness of new programs : Are there existing public communication programs, processes, systems, efforts, and plans in place for the purposes of public education? What are they? Explain in detail.Has the effectiveness of any of these existing efforts been measured? Explain. ..

What are the fund stated investment objectives : Not all venture funds are the same. Each fund has its own investment objectives and criteria. Funds vary by size, investment target, required rates of return, size of investment and industry. Find three venture funds - one in California, one in New Y..

User Account

All Pages