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Hi everybody, I’m really stuck when calculating factor cost in Bpp Kit – Special Gift Supplier Co.
In question, wrote: ” A one-off payment of $25,000 is payment to the factor”
And the answer comment, say: ” Full factor fee is not charged but only interest.”
Why only interest charge but not full factor fee charge?i think it might be a mistake,i got stuck on the same question and there doesn’t seem to be any logic behind his answer.
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For a one-off charge payment, it shouldn’t be included in our calculation of the annual cost/benefits because it does not incur every year. instead, you could do either of two ways:
1- You could totally ignore it as it is a one-off payment, and our factoring contract is for a long term treatment. This should be the easiest option.
2- Calculate the interest assuming an interest generating loan will be taken by the business in order to make that one-off payment. Therefore, its interest is calculated as it is paid annually.Just remember, in this question we are only interested in payments/savings that take place on ANNUAL basis.
I hope this could help.
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