Bulldogs Inc. enters into an agreement with a firm that will factor the company's accounts receivable. The factor agrees to buy the company's receivables, which average P100,000 per month and have an average collection period of 30 days. The factor will advance up to 80% of the face value of receivables at an annual rate of 10% and a charge fee of 2% on all receivables purchased. The controller of the company estimates that the company would save P18,000 in collection expenses over the year. Fees and interest are not deducted in advance. Assuming a 360-day year, what is the annual cost of financing? *
Bulldogs Inc. enters into an agreement with a firm that will factor the company's accounts receivable. The factor agrees to buy the company's receivables, which average P100,000 per month and have an average collection period of 30 days. The factor will advance up to 80% of the face value of receivables at an annual rate of 10% and a charge fee of 2% on all receivables purchased. The controller of the company estimates that the company would save P18,000 in collection expenses over the year. Fees and interest are not deducted in advance. Assuming a 360-day year, what is the annual cost of financing? *
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 19P
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![Bulldogs Inc. enters into an agreement with a firm that will factor the company's accounts
receivable. The factor agrees to buy the company's receivables, which average P100,000 per
month and have an average collection period of 30 days. The factor will advance up to 80% of
the face value of receivables at an annual rate of 10% and a charge fee of 2% on all receivables
purchased. The controller of the company estimates that the company would save P18,000 in
collection expenses over the year. Fees and interest are not deducted in advance. Assuming a
360-day year, what is the annual cost of financing? * O
O 12%
O 10%
O 14%
O 17.5%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F88253c27-8699-4b5d-be83-16ba934891d1%2F81d0bb29-f8c3-4fd2-b90c-5d4e26892a7e%2Fym4zj4u_processed.png&w=3840&q=75)
Transcribed Image Text:Bulldogs Inc. enters into an agreement with a firm that will factor the company's accounts
receivable. The factor agrees to buy the company's receivables, which average P100,000 per
month and have an average collection period of 30 days. The factor will advance up to 80% of
the face value of receivables at an annual rate of 10% and a charge fee of 2% on all receivables
purchased. The controller of the company estimates that the company would save P18,000 in
collection expenses over the year. Fees and interest are not deducted in advance. Assuming a
360-day year, what is the annual cost of financing? * O
O 12%
O 10%
O 14%
O 17.5%
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