Johnson Company expects that it will need $600,000 cash for March 20X2. Possible means of financing are:

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(a) Establish a 1-year credit line for $600,000. The bank requires a 2 percent commitment fee. The interest rate is 21 percent. Funds are needed for 30 days.

(b) Fail to take a 2/10, net/40 discount on a $600,000 credit purchase.

Which financing strategy should be selected?

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Financial Markets and Institutions

ISBN: 978-1337099745

12th edition

Authors: Jeff Madura

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Posted Date: Jun 02, 2022 05:45 AM

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Johnson Company expects that it will need $600,000 cash for March 20X2. Possible means of financing are:

Question:

Expert Answer:

ANSWER b Fail to take a 210 net40 discount on a 600000 credit purchase Finance Strategy is an approa... View the full answer

Financial Markets and Institutions

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