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What is the effective annual cost

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Question - Zilan Inc. has 40 days of accounts receivables (AR) of $400,000 on its books. A factoring company offers a 40-day AR loan equal to 85% of the face value of the AR. The quoted interest rate is 8%, and there is a commission fee of 0.75%. The factoring will result in a reduction of $2,000 in bad debt losses for Zilan. What is the effective annual cost?

Reference no: EM133003354

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