Fundamentals of Corporate Finance, 8 th edition, Brealey, Myers, Marcus, (Chpt 20, Q3, LO2) 8.Company X sells

Fantastic news! We've Found the answer you've been seeking!

Question:

Fundamentals of Corporate Finance, 8^th edition, Brealey, Myers, Marcus,

(Chpt 20, Q3, LO2)

8.Company X sells on a 1/20, net 60, basis. Company Y buys goods with an invoice of $ 1,000.

a.How much can company Y deduct from the bill if it pays on day 20?

1% of $1,000, or $10.00.

b.How many extra days of credit can company Y receive if it passes up the cash discount?

60 days minus 20 days = 40 days

c.What is the effective annual rate of interest if Y pays on the due date rather than day 20?

Effective annual rate = (1+ discount / discounted price) 365 / extra days of credit -1

= (1 + 10 / 990) 365/40- 1

= (1.0101) 9.125- 1 =

= 1.09603617- 1

= .09603617

Verify answers please.

Posted Date: May 18, 2024 04:10 AM

See More Questions

Perhaps more surprising to Mr. Pitkin was a proposal by the VP of Marketing to make a major investment in market share by increasing promotional expenditures by $2.5 million during 1998-2000. Sales...
1. As a manager, you are steward of the companys funds. Are you willing to forgo departmental improvements and potential salary increases to honor this claim? Remember, there is no legal obligation...
The Westchester Chamber of Commerce periodically sponsors public service seminars and programs. Currently, promotional plans are under way for this years program. Advertising alternatives include...
An important omission from flowcharts and matrix techniques is ( ___________________ ). (a) the ability to represent decisions (b) the ability to include internal control considerations (c) the...
Whetzel Corporation reported net income of $152,000, declared dividends on common stock of $50,000, and had an ending balance in retained earnings of $360,000. Common stockholders equity was $700,000...
Madsen Motors's bonds have 21 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 8%, and the yield to maturity is 11%. What is the...
The National Institutes of Health conducts ongoing surveys of US adults called the Health Information National Trends Survey (hereafter abbreviated HINTS). From the National Institutes of Health:...
a. What purpose is served by management letters? b. List the types of data that may be included in management letters?
Indicate the limitation of the auditor's conclusions on internal accounting control and the manner in which the conclusions are expressed.
Who are the principal recipients of the auditor's required communication of material weaknesses in internal accounting control?
The auditor must audit other information in documents containing audited financial statements. Do you agree? Why or why not?
In small groups, discuss the methods by which a job analysis can be completed. Compare and contrast these methods, noting the pros and cons of each. Which method of job analysis would be most...
As per AS-3, Cash flow statement is mandatory for: a. All enterprises. b. Companies listed on stock exchange. c. Companies with turnover of more than Rs. 50 crores.
On 1 July 2021, Croydon Ltd leased ten excavators for five years from Machines4U Ltd. The excavators are expected to have an economic life of 6 years, after which time they will have an expected...
Express the decimal $1 . \overline{813}$ as a fraction $\frac{m}{n}$ (where $m$ and $n$ are integers).
Which of the following numbers are rational, and which are irrational? Express those which are rational in the form $\frac{m}{n}$ with $m, n \in \mathbb{Z}$. (a) $0 . a_{1} a_{2} a_{3} \ldots$,...
The Fibonacci sequence starts with the terms 1,1 and then proceeds by letting the next term be the sum of the previous two terms. So the sequence starts $1,1,2,3,5,8,13,21,34, \ldots$. With this in...

Fundamentals of Corporate Finance, 8 th edition, Brealey, Myers, Marcus, (Chpt 20, Q3, LO2) 8.Company X sells

Question:

Expert Answer:

Students also viewed these finance questions