Question: Rework parts a through d of Problem 22-9 using a spreadsheet model. Answer the following questions: a. How large would the accounts payable balance be

Rework parts a through d of Problem 22-9 using a spreadsheet model. Answer the following questions:

a. How large would the accounts payable balance be if Malone takes discounts? If it does not take discounts and pays in 30 days?

b. How large must the bank loan be if Malone takes discounts? If Malone doesn't take discounts?

c. What are the nominal and effective costs of costly trade credit? What is the effective cost of the bank loan? Based on these costs, what should Malone do?

d. Assume Malone forgoes the discount and borrows the amount needed to become current on its payables. Construct a projected balance sheet based on this decision.

e. Using interest rates in the range of 5% to 25% and compensating balances in the range of 0% to 30%, perform a sensitivity analysis that shows how the size of the bank loan would vary with changes in the interest rate and the compensating balance percentage.

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Malone Feed and Supply Company buys on terms of 110 net 30 but it has not been paying on timeit is a slower payer and its suppliers are getting upset Malone does not take discounts and it has been pay... View full answer

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