Chapter $20$: Short$-$Term Financial Planning

$8.$ Excel Solution Hand$-$to$-$Mouth $($H$2$MM$)$ is currently cash$-$constrained, and must make a docision about whether to delay paying one of its suppliers, or take out a loan. It owes the supplier $$10,000$ with terms of $\frac{2}{10},$ net $40,$ so the supplier will provide a $2\%$ discount it H$2$M pays todiry $($when the discount period expires$).$ Athernatively, H$2$M can pay the full $$10,000$ in one month when the invoice is due. H$2$M is considering three options:

$\backslash$table$[[$Alternative A$.,$Forgo the discount on its trade credit agreement, wat and pay the full $$10,000$ in one month.$],[$Alternative B:$,$Borrow the money needed to pay is suppler todry from Bank A$.$ which has offered a one$-$month loan at an APR of $12\%$ with monthly compounding. The bank will require a ino$-$interest$)$ compensating balance of $5\%$ of the tace value of the Ioan and will charge a $$100$ loan origination fee. Because H$2$M has no cash, it will need to bonow the funds to cover these additional amounts as wel.$],[$Alternative C:$,$Bortow the money needed to pay ls suppler todiry from Bank B$,$ which has oflered a one$-$month loan at an APR of $15\%$ with monthly compounding. The loan has a $1\%$ loan origination fee, which, again. H$2$M will need to borow to cover.$]]$