In order to convert Account Receivable into faster cash,

In order to convert Account Receivable into faster cash, a company
can sell its accounts receivable to another company, called a factor, at a discount. Assume your average credit sales are $50 million per year and average accounts receivable are $5 million. A factoring company offers you an agreement that it will be buying your accounts receivable at a 2.20% discount. Your bank offers you a credit at R% per year (actual yearly rate). What would be the minimum R% for which you would choose factoring? That is, what is the rate R% offered by the bank at or below which you would rather borrow money from the bank instead of factoring? Express your answer as a percentage

Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"