A factor has offered to buy the accounts receivables from Gorwa Co. on a non-recourse...
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Accounting
A factor has offered to buy the accounts receivables from Gorwa Co. on a non-recourse basis for an annual fee of 3% of credit sales. Gorwa's receivables average $1,000,000 per month and have an average collection period of 60 days. The factor will advance 80 percent of the face value of receivables at 18 percent. The controller estimates that the firm would save $300,000 in bad debt and opportunity cost every year, is the proposal to factor receivables financially acceptable
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