$($LOS$-$I & $8-2)$ Neveready Flashlights Inc. needs $$340,000$ to take a cash discount of $\frac{3}{17},$ net $72.$ A banker will lend the money for $55$

days at an interest cost of $$10,400.$

a$.$ What is the effective rate on the bank loan?

b$.$ How much would it cost $($in percentage terms$)$ if the firm did not take the cash discount but paid the bill in $72$ days instead of $17$

days?

c$.$ Should the firm borrow the money to take the discount?

d$.$ If the banker requires a $20$ percent compensating balance, how much must the firm borrow to end up with the $$340,000?$

e$.$ What would be the effective interest rate in part $d$ if the interest charge for $55$ days were $$13,000?$ Should the firm borrow with the

$20$ percent compensating balance? $($The firm has no funds to count against the compensating balance requirement.$)$