Resty Corporation needs P400,000 additional financing. The company is considering the choice of financing with a bank or a factor. The bank loan carries a 20 percent interest rate on a discount basis with a required compensating balance of 16 percent.
Resty Corporation needs P400,000 additional financing. The company is considering the choice of financing with a bank or a factor. The bank loan carries a 20 percent interest rate on a discount basis with a required compensating balance of 16 percent. The factor charges a 3 percent commission on invoices purchased monthly. The interest rate associated with these invoices is 11 percent with interest deductible in advance. If a factor is used, there will be a monthly savings of P1,500 per month in credit department costs. Further, the expense of an uncollectible account of 2 percent on the factored receivables will not exist. (A) What amount of principal must the company borrow from the bank to receive P400,000 in proceeds? (B) What amount of
choose the bullet with the correct answer
- (A) P325,000.00 and (B) P265,116.00
- (A) P525,000.00 and (B) P465,116.00
- (A) P525,000.00 and (B) P265,116.00
- (A) P625,000.00 and (B) P265,116.00
- (A) P625,000.00 and (B) P465,116.00
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