1. Hempstead Electric buys its wiring materials in bulk directly from Hamilton Wire and Cable Company....

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1. Hempstead Electric buys its wiring materials in bulk directly from Hamilton Wire and Cable Company. Hamilton offers credit terms that involve a cash discount of 3 percent if payment is received in 30 days. Otherwise, the full amount is due in 90 days. What is the approximate cost of credit to Hempstead if it exceeds 30 days and passes up the cash discount? 2. 3. 4. The EPG Manufacturing Company uses commercial paper regularly to support its needs for short-term financing. The firm plans to sell $100 million in 270-day-maturity paper, on which it expects to pay discounted interest at a rate of 12 percent per annum ($9 million). In addition, EPG expects to incur a cost of approximately $100,000 in dealer placement fees and other expenses of issuing the paper. What is the effective cost of credit to EPG? What are some examples of unsecured and secured sources of short-term credit? The A. B. Good Company sells electrical supplies to building contractors on terms of net 60. The firm's average monthly sales are $100,000; thus, given the firm's 2-month credit terms, its average receivables balance is $200,000. The firm pledges all of its receivables to a local bank, which in turn advances up to 70 percent of the face value of the receiv- ables at 3 percent over prime and charges a 1 percent processing fee on all receivables pledged. A. B. Good follows a practice of borrowing the maximum amount possible, and the current prime rate is 10 percent. What is the APR of using this source of financing for a full year? 1. Hempstead Electric buys its wiring materials in bulk directly from Hamilton Wire and Cable Company. Hamilton offers credit terms that involve a cash discount of 3 percent if payment is received in 30 days. Otherwise, the full amount is due in 90 days. What is the approximate cost of credit to Hempstead if it exceeds 30 days and passes up the cash discount? 2. 3. 4. The EPG Manufacturing Company uses commercial paper regularly to support its needs for short-term financing. The firm plans to sell $100 million in 270-day-maturity paper, on which it expects to pay discounted interest at a rate of 12 percent per annum ($9 million). In addition, EPG expects to incur a cost of approximately $100,000 in dealer placement fees and other expenses of issuing the paper. What is the effective cost of credit to EPG? What are some examples of unsecured and secured sources of short-term credit? The A. B. Good Company sells electrical supplies to building contractors on terms of net 60. The firm's average monthly sales are $100,000; thus, given the firm's 2-month credit terms, its average receivables balance is $200,000. The firm pledges all of its receivables to a local bank, which in turn advances up to 70 percent of the face value of the receiv- ables at 3 percent over prime and charges a 1 percent processing fee on all receivables pledged. A. B. Good follows a practice of borrowing the maximum amount possible, and the current prime rate is 10 percent. What is the APR of using this source of financing for a full year?

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If Hempstead Electric takes advantage of the cash discount offered by Hamilton Wire and pays within 30 days it can effectively decrease the purchase price thanks to the 3 reduction Should Hempstead fa... View the full answer