Receivables factored less interest on the loan

Assignment Help Financial Management

Reference no: EM131359236

Cost of factoring?) MDM Inc. is considering factoring its receivables. The firm has credit sales of ?$500,000 per month and has an average receivables balance of ?$1,000,000 with? 60-day credit terms. The factor has offered to extend credit equal to 90 percent of the receivables factored less interest on the loan at a rate of 1.6 percent per month. The 10 percent difference in the advance and the face value of all receivables factored consists of a 3 percent factoring fee plus a 7 percent? reserve, which the factor maintains. In? addition, if MDM Inc. decides to factor its? receivables, it will sell them? all, so that it can reduce its credit department costs by ?$1,300 a month. What is the cost of borrowing the maximum amount of credit available to MDM Inc. through the factoring? agreement?

Note?: Assume a? 30-day month and? 360-day year. QUESTION: The cost of borrowing the maximum amount of credit available to MDM Inc. through the factoring agreement is _______?%. ?(Round to two decimal? places.)

Reference no: EM131359236

Questions Cloud

Prepare a graph of the monthly forecasts : Prepare a graph of the monthly forecasts and average forecast demand for Chicago Paint Corp., a manufacturer of specialized paint for artists

Find the sequence impedances for this system : For a double line-to-ground fault on phases B and C, the positive sequence current is j3.57 P.u., and for a double-line fault between phases B and C, its value is -j2.67. Assuming the sending-end voltage E = 1.2, find the sequence impedances for t..

Existing organization three major functions : Compare and contrast an existing organization's three major functions (i.e., finance, marketing, and operations), and then justify the interdependence that operations have to finance and marketing. Provide examples to support your rationale.

Manufacturing or service processes use value stream mapping : Identify stakeholders and plan how manufacturing or service processes use value stream mapping. What is the benefit and why do companies do it? How would a company measure improvements?

Receivables factored less interest on the loan : Cost of factoring?) MDM Inc. is considering factoring its receivables. The firm has credit sales of ?$500,000 per month and has an average receivables balance of ?$1,000,000 with? 60-day credit terms. The factor has offered to extend credit equal to ..

Evaluate changes that occur in the body as a person ages : Imagine you accepted a new job as an exercise specialist at your local hospital working in the cardiopulmonary rehab department. You have had minimal experience working with clients over the age of 55. You are aware there are differences in exerc..

Explain why integrated technology : Explain why integrated technology has improved the ability to manage supply chains.

Define ethical frameworks that he company executive may have : Identify and define two ethical frameworks that the company executives may have used in making their decision. Include detailed speaker's notes, a professional slide background and graphics on each slide.

Favorite segments of the hospitality industry : 1. List and discuss your favorite segments of the hospitality industry, 2. And tell us they are your favorites. 3. How do demographics affect how people use different segments of the hospitality industry?

User Account

All Pages