Essay
A firm sells its accounts receivables to a factor at a 1.5% discount. The average collection period is 1 month. What is the implicit effective annual interest rate on the factoring arrangement? Suppose the average collection period is 1.5 months. How does this affect the implicit effective annual interest rate?
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EAR = [1 + 0.015/(1 - 0.015)]12 ...View Answer
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