The firm should repay the amount within 10 days, by doing so it will be eligible to take the discount offered, the correct answer is-
c. on day 10 with funds borrowed from the credit line
QUESTION 7 1 po Your firm is short of cash but can borrow from its credit...
A supplier to your firm offers credit terms of 2/15 net 45 however, your firm never takes advantage of the discount but instead always pays full price on day 45. Your finance intern claims that your firm would be better off borrowing money from an existing but little used line of credit at a current annualized rate of 8%, pay the firm providing credit at the end of the discount period (day 15) and to then repay the line of...
Assume the credit terms offered to your firm by your suppliers are 2/10, net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30. (Hint: Use a 365-day year.) The cost of trade credit is ___%?
Your firm purchases goods from its supplier on terms of 2/10, Net 45. What is the effective annual cost to your firm if it chooses not to take advantage of the trade discount offered?
Golden Foods, Inc. has a revolving credit agreement with its bank under which it can borrow up to $10 million at an annual interest rate of 10%. The firm is required to maintain a 20% compensating balance on any funds borrowed under this agreement and to pay a 1% commitment fee on the unused portion of the credit line. (Assume Golden has no existing funds on deposit with the bank.) Determine the EAR assuming an average of $6 million is...
Assume the trade credit terms offered to your firm by your suppliers are 3/5, Net 30. Calculate the cost of the trade credit (effective annual rate) from day 5 until day 30 when you paid. 25.37% 55.94% 29.30% 21.61%
Suppose the credit terms offered to your firm by its suppliers are 2/10, net 30 days. Your firm is not taking discounts, but is paying after 22 days instead of Day 30. You point out that the nominal cost of not taking the discount and paying on Day 30 is approximately 37%. But since your firm is neither taking discounts nor paying on the due date, what is the effective annual percentage cost (not the nominal cost) of its costly...
Blueroot Inc. is considering a change in its financing policy. Currently, it uses maximum trade credit by not taking discounts on its purchases. The standard industry credit terms offered by all its suppliers are 2/10 net 30 days, and the firm pays on time. The new CFO is considering borrowing from its bank, using short-term notes payable, and then taking discounts. The firm wants to determine the effect of this policy change on its net income. Its net purchases are...
1 pts Question 5 A firm is offered credit terms of 2/10 net 45 by most of its suppliers but frequently does not have the cash available to take the discount. The firm has a credit line available at a local bank at an interest rate of 12 percent. The firm should give up the cash discount, financing the purchase with the line of credit take the cash discount, financing the purchase with the line of credit, the cheaper source...
A firm purchases $4,562,500 in goods over a 1-year period from its sole supplier. The supplier offers trade credit under the following terms: 2/15, net 50 days. Davis finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the company’s free trade credit? $187,500 Based on the information from Question 31, what is the effective annual cost of the firm’s costly...
Early Payment discount decisions: Prairie Manufacturing has four possible suppliers, all of which offer different credit terms. Except for the differences in creditterms, their products and services are virtually identical. The credit terms offered by these suppliers are shown in the followingtable: SUPPLIER CREDIT TERM J 3/5 NET 30 EOM K 4/30 NET 100 EOM L 2/15 NET 60 EOM M 2/10 NET 120 EOM . (Assume a 365-day year.) A. Calculate the approximate cost of giving...