What is the cost of borrowing maximum amount of credit

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Reference no: EM131359066

MDM Inc. is considering factoring its receivable. The firm has credit sales of $600,000 per month and an average receivable balance of $600,000 with net 90 credit terms. The 10% difference in the advance and the face value of all receivables factored consists of a 0.5% factoring fee plus a 9.5% reserve. The factor will advance a loan which equals 85% of the receivables factored less interest on the loan at 1.5% per month. What is the cost of borrowing the maximum amount of credit available to MDM Inc. though factoring agreement? (Calculate the APR and EAR and make any necessary assumption)

Reference no: EM131359066

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Cost of borrowing the maximum amount of credit available : MDM Inc. is considering factoring its receivable. The firm has credit sales of $600,000 per month and an average receivable balance of $600,000 with net 90 credit terms. What is the cost of borrowing the maximum amount of credit available to MDM Inc...

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