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Problem Walk$-$Through

Lancaster Lumber buys $$8$ million of materials $($net of discounts$)$ on terms of $\frac{3}{5},$ net $50,$ and it currently pays on the $5^{th}$ day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume $365$ days in year for your calculations.

If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, $5$ million should be entered as $5,000,000.$ not round intermediate calculations. Round your answer to the nearest cent.

$

What would be the nominal cost of that credit? Do tht round intermediate calculations. Round your answer to two decimal places.

$\%$

What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

If the company could get the funds from a bank at a rate of $12\%,$ interest paid monthly, based on a $365-$day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places.

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Should Lancaster use bank debt or additional trade credit?N