question archive B) Mirza Sdn Bhd is having cash flow problems due to current economic condition
B) Mirza Sdn Bhd is having cash flow problems due to current economic condition
Subject:AccountingPrice: Bought3
B) Mirza Sdn Bhd is having cash flow problems due to current economic condition. The company plans to factor RM140,000 of its accounts receivable to a factoring firm, saving RM600 per month in administrative costs. Any advance will be subject to a 12% annual interest rate, as well as a 10% reserve and a 2.5% processing fee from the factoring company. The payment period given to the company is 90 days. Assume a 360-day in a year.
Required:
Assuming the factor agrees to give the maximum advance to the company, calculate the effective annual rate of interest to Mirza Sdn Bhd on the factoring arrangement.
