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Hi,
To calculate the factor fee the answer is 25.75m (sales) x 80% x (7% – 5%)
Why have they done 7% – 5% for?
When I was answering the OT questions, they’ve divided the interest rate by 12 months then multiplied by how many months saved.
Thanks
There are two ways of showing it (with both end up with the same net cost or benefit).
I think that the way I do it in the lectures is easier and safer.
Instead of showing the factors interest as a cost and then the full interest saved as a benefit, the alternative is to show the net cost (which is why 7% – 5%).
Again, it is up to you and does not matter – the end result will be the same either way.
Thank you.
If I was to calculate it the way in lectures, is my calculation correct:
7%/ 360 days x (60 days old – 35 days new) = 0.49%
The net benefit is coming out different. Can you please let me know where I’m going wrong?
Thanks
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