Gamesoft Inc. has $100 million in annual credit sales that take an average of 40 days to collect. to meet Gamesoft's cash flow problems it maintains a floating loan at 10% interest. Gamesoft says they are indifferent to factoring their receivables at a 3% fee. The factor would advance 70% of the receivables at 8% interest, would cut the collection period down to only 30 days, and eliminate all bad debts. What is the amount of Gamesoft's bad debts that exist by collecting the receivables on its own?

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The Answer of Gamesoft Inc. has $100 million in annual credit sales that take an average of 40 days to collect. to meet Gamesoft's cash flow problems it maintains a floating loan at 10% interest. Gamesoft says they are indifferent to factoring their receivables at a 3% fee. The factor would advance 70% of the receivables at 8% interest, would cut the collection period down to only 30 days, and eliminate all bad debts. What is the amount of Gamesoft's bad debts that exist by collecting the receivables on its own?