Amed Corp has annual sales of $400,000 and an average collection period of 38 days. • A factoring company is offering a 38-day receivables loan equal to 80% of the accounts receivable at 8% interest along with a commission fee of 0.8% of the receivables. • The firm estimates that by taking the offer, it could save $200 in collection costs and 0.75% in bad debt costs, as a percentage of sales. What is the effective annual cost (in percent) of the arrangement to Amed Corp? ( Assume 365 days in one year. Do not use the % sign. If your answer is 123.45%, then enter 123.45. Use four decimal points in your answer)
Amed Corp has annual sales of $400,000 and an average collection period of 38 days. • A factoring company is offering a 38-day receivables loan equal to 80% of the accounts receivable at 8% interest along with a commission fee of 0.8% of the receivables. • The firm estimates that by taking the offer, it could save $200 in collection costs and 0.75% in bad debt costs, as a percentage of sales. What is the effective annual cost (in percent) of the arrangement to Amed Corp? ( Assume 365 days in one year. Do not use the % sign. If your answer is 123.45%, then enter 123.45. Use four decimal points in your answer)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Concept explainers
Question
24) Can i get help with this question please
Transcribed Image Text:Amed Corp has annual sales of $400,000 and an average collection period of 38 days.
A factoring company is offering a 38-day receivables loan equal to 80% of the accounts receivable at 8% interest along with a commission fee of
0.8% of the receivables.
The firm estimates that by taking the offer, it could save $200 in collection costs and 0.75% in bad debt costs, as a percentage of sales.
What is the effective annual cost (in percent) of the arrangement to Amed Corp? ( Assume 365 days in one year. Do not use the % sign. If your answer is
123.45%, then enter 123.45. Use four decimal points in your answer)
Numeric Response
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education