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What is the effective annual cost

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Reference no: EM133060630

Amed Corp has annual sales of $400,000 and an average collection period of 38 days.

  • A factoring company is offering a 38-day receivables loan equal to 80% of the accounts receivable at 8% interest along with a commission fee of 0.8% of the receivables.
  • The firm estimates that by taking the offer, it could save $200 in collection costs and 0.75% in bad debt costs, as a percentage of sales.

What is the effective annual cost (in percent) of the arrangement to Amed Corp?

Reference no: EM133060630

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