Percentages need to be entered in decimal format, for instance 3% would be entered as .03.) Cooley Industries needs an additional $500,000, which it plans to obtain through a factoring arrangement. The factor would purchase Cooley's accounts receivables and advance the invoice amount, minus a 2% commission, on the invoices purchased each month. Cooley sells on terms of net 30 days. In addition, the factor charges a 12% annual interest rate on the total invoice amount, to be deducted in advance. (This information is shown on the spreadsheet provided.) Would it be to Cooley's advantage to offer to pay the factor a commission of 2.5% if it would lower the interest rate to 10.5% annually? Assume the firm needs $500,000. Explain your answer. Assume a commission of 2% and an interest rate of 12%. What would be the total cost of the factoring arrangement if Cooley's funding needs rose to $650,000? Would the factoring arrangement be profitable under these circumstances? Why or why not?

Percentages need to be entered in decimal format, for instance 3% would be entered as .03.) Cooley Industries needs an additional $500,000, which it plans to obtain through a factoring arrangement. The factor would purchase Cooley's accounts receivables and advance the invoice amount, minus a 2% commission, on the invoices purchased each month. Cooley sells on terms of net 30 days. In addition, the factor charges a 12% annual interest rate on the total invoice amount, to be deducted in advance. (This information is shown on the spreadsheet provided.) Would it be to Cooley's advantage to offer to pay the factor a commission of 2.5% if it would lower the interest rate to 10.5% annually? Assume the firm needs $500,000. Explain your answer. Assume a commission of 2% and an interest rate of 12%. What would be the total cost of the factoring arrangement if Cooley's funding needs rose to $650,000? Would the factoring arrangement be profitable under these circumstances? Why or why not?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter13: Budgeting And Standard Costs

Section: Chapter Questions

Problem 13.6.2MBA

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