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Rubic with export sales of $480m pa has an average collection period of 3 months, bad debts are 2% on sales. 

 

A factoring company will provide non-recourse factoring for a fee of 5% of revenue. As a result of this, administration savings will be made of £8m p.a. and the credit period will fall to 2 months.

 

Rubic has a cost of capital of 10%, and the exchange rate is currently 2 $/£.

Requirements:

Analyze and comment whether Rubic should accept factor's decision.

Marks: 5

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