What is the cost of borrowing the maximum amount of credit

Reference no: EM13274243

MDM Inc is considering factoring its receivables. The firm has credit sales of $300,00per month and has an average receivables balance of $600, 000 with 60 day credit terms. The factor has offered to extend credit equal to 90 percent of the receivable less interest on the loan of 1.6 per month. The 10 percent difference in the advance and the face value of all receivables factored at e percent factoring fee plus a 7 percent reserve which the factor maintains. In addition, if MDM decides to factor its receivables, it will sell them all so that it can reduce he credit department costs by $1,600 per month. What is the cost of borrowing the maximum amount of credit available to MDM through factoring? Assume 30 day month and 360 day year.

Reference no: EM13274243

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