Assume that the operation of your business resulted in sales of $730,000 last year. Year-end receivables are $100,000. You are considering factoring the receivables to raise cash to help finance your ventures growth. The factor imposes a 7% discount and charges an additional 1% for each expected ten-day average collection period over thirty days. A. Estimate the dollar amount you would receive from the factor for your receivables if the collection period was thirty days or less. B. Estimate the dollar amount you would receive from the factor for your receivables if the average collection period was sixty days.
Assume that the operation of your business resulted in sales of $730,000 last year. Year-end receivables are $100,000. You are considering factoring the receivables to raise cash to help finance your ventures growth. The factor imposes a 7% discount and charges an additional 1% for each expected ten-day average collection period over thirty days. A. Estimate the dollar amount you would receive from the factor for your receivables if the collection period was thirty days or less. B. Estimate the dollar amount you would receive from the factor for your receivables if the average collection period was sixty days.
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
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Assume that the operation of your business resulted in sales of $730,000 last year. Year-end receivables are $100,000. You are considering factoring the receivables to raise cash to help finance your ventures growth. The factor imposes a 7% discount and charges an additional 1% for each expected ten-day average collection period over thirty days.
A. Estimate the dollar amount you would receive from the factor for your receivables if the collection period was thirty days or less.
B. Estimate the dollar amount you would receive from the factor for your receivables if the average collection period was sixty days.
Transcribed Image Text:Question::Assume thatthe operationofyourbusinessresulted in sales of $730,000-last year.
Year-end receivables are $100,000. Youareconsideringfactoring the receivables to raise cash to
help finance your ventures growth. The factorimposes a 7%discountand charges an additional·
1% foreach expected ten-day average collectionperiod overthirty days.
'A. Estimatethedollaramountyouwould receive from the factorforyourreceivables if the
collection period was thirty days or less.¶
B. Estimatethedollaramountyouwould receive from the factorforyourreceivables if the-
average collection periodwas sixty days.
Transcribed Image Text:Question::Assume thatthe operationofyourbusinessresulted in sales of $730,000-last year.
Year-end receivables are $100,000. Youareconsideringfactoring the receivables to raise cash to
help finance your ventures growth. The factorimposes a 7%discountand charges an additional·
1% foreach expected ten-day average collectionperiod overthirty days.
'A. Estimatethedollaramountyouwould receive from the factorforyourreceivables if the
collection period was thirty days or less.¶
B. Estimatethedollaramountyouwould receive from the factorforyourreceivables if the-
average collection periodwas sixty days.
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