Access Enterprises is vetting four possible suppliers of an important raw material used in its production process,
Question:
Supplier Credit Terms
A ......... 1/10 net 40
B ......... 2/20 net 90
C ......... 1/20 net 60
D ......... 3/10 net 75
a. Calculate the interest rate associated with not taking the discount from each supplier.
b. If the firm needs short-term funds, which are currently available from its commercial bank at 11%, and if each of the suppliers is viewed separately, which, if any, of the suppliers’ cash discounts should the firm not take? Explain why.
c. Suppose that the firm could stretch its accounts payable to Supplier A (net period only) by 20 days. How would this affect your answer in part (b) concerning this supplier?
Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
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a The interest rate from not taking the discount for Supplier A 110 net 40 0...View the full answer
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Related Book For 
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
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