Company A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $13,645, but the supplier will give them a 3.46% discount if they pay in the first 14 days (when the discount period expires). That is, they can either take the discount by paying in the first 14 days, or $13,645 in 2 month(s) when the net invoice is due. What would be the cost for the firm if they forgo the discount on its trade credit agreement, wait and pay the full $13,645 in 2 month(s)?

Company A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $13,645, but the supplier will give them a 3.46% discount if they pay in the first 14 days (when the discount period expires). That is, they can either take the discount by paying in the first 14 days, or $13,645 in 2 month(s) when the net invoice is due. What would be the cost for the firm if they forgo the discount on its trade credit agreement, wait and pay the full $13,645 in 2 month(s)?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

Problem 14PROB

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