Assume the Following Facts About a Firm That Borrows by Pledging

Multiple Choice

Assume the following facts about a firm that borrows by pledging its receivables $\begin{array}{ll}\text { Average balance of accounts receivable }&\$50,000\\\text { Annual receivables turnover ( } 360 / \mathrm{ACP}) & 6 \mathrm{x} \\\text { Administrative fee charged on all new receivabless } & 1\% \\\text { Interest rate on outstandingloans } & 12 \% \\\text { Percent of receivables accepted } & 75 \%\end{array}$ What is the effective cost of financing stated as an annual rate?

A) 23.5%
B) 20.0%
C) 13.0%
D) 16.8%