Capital Financial Corporation will lend 90 percent against account balances that

Question

   

  

    Capital Financial Corporation will lend 90 percent against account balances that have averaged 30 days or less; 80 percent for account balances between 31 and 40 days; and 70 percent for account balances between 41 and 45 days. Customers that take over 45 days to pay their bills are not considered acceptable accounts for a loan.

  

    The current prime rate is 12.50 percent, and Capital charges 4.50 percent over prime to Charmin as its annual loan rate.

  

Determine the maximum loan for which Charmin Paper Company could qualify.

  

  

Determine how much one month’s interest expense would be on the loan balance determined in part a.(Do not round intermediate calculations. Round your final answer to 2 decimal places.)

      

Charmin Paper Company sells to the 12 accounts listed next.

Explanation / Answer

Ans 1

Ans 2

Account Receivable Balance Outstanding Average Age of the Account Over the Last Year Age Class Loan Qualifying Amount A 63,600                25.00 <=30 90%      57,240.00 B 1,33,000                43.00 41-45 70%      93,100.00 C 73,300                19.00 <=30 90%      65,970.00 D 29,100                57.00 >45 0%                     -   E 56,100                42.00 41-45 70%      39,270.00 F 2,53,000                39.00 31-40 80% 2,02,400.00 G 33,400                24.00 <=30 90%      30,060.00 H 3,49,000                67.00 >45 0%                     -   I 45,300                32.00 31-40 80%      36,240.00 J 90,600                59.00 >45 0%                     -   K 2,37,000                15.00 <=30 90% 2,13,300.00 L 61,000                37.00 31-40 80%      48,800.00 Maximum Amount of Loan 7,86,380.00

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