in the following table. The credit terms for each of three suppliers are shown Supplier X...
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in the following table. The credit terms for each of three suppliers are shown Supplier X Y Z Credit terms 1/10 net 55 EOM 2/10 net 30 EOM 2/20 net 60 EOM a. Determine the approximate cost of giving up the cash discount from each supplier. b. Assuming that the firm needs short-term financing, indicate whether it would be better to give up the cash discount or take the discount and borrow from a bank at 15% annual interest. Evaluate each supplier separately using your findings in part a. c. What impact, if any, would the fact that the firm could stretch its accounts payable (net period only) by 20 days from supplier Z have on your answer in part b relative to this supplier? in the following table. The credit terms for each of three suppliers are shown Supplier X Y Z Credit terms 1/10 net 55 EOM 2/10 net 30 EOM 2/20 net 60 EOM a. Determine the approximate cost of giving up the cash discount from each supplier. b. Assuming that the firm needs short-term financing, indicate whether it would be better to give up the cash discount or take the discount and borrow from a bank at 15% annual interest. Evaluate each supplier separately using your findings in part a. c. What impact, if any, would the fact that the firm could stretch its accounts payable (net period only) by 20 days from supplier Z have on your answer in part b relative to this supplier?
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Answer rating: 100% (QA)
a To determine the approximate cost of giving up the cash discount from each supplier we need to calculate the effective annual interest rate EAR for each suppliers credit terms For supplier X the cre... View the full answer
Related Book For
Introduction To Probability And Statistics
ISBN: 9781133103752
14th Edition
Authors: William Mendenhall, Robert Beaver, Barbara Beaver
Posted Date:
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