esLittle Kimi Clothiers can borrow from its bank at 20 percent to take a cash discount. The terms of the cash discount are 3/25 net 85.a. Compute the cost of not taking the cash discount. (Use 365 days in a year. Do not round the intermediate calculations. Round thefinal answer to 2 decimal places.)Cost of not taking a cash discountb. Should the firm borrow the funds?%00YesO No

a:Cost of not taking cash discount = [(Discount % / 100% - Discount %) * (365 / (Final due date -…

Answered: es Little Kimi Clothiers can borrow…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 19P

See similar textbooks

Similar questions

Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate. a. The nominal annual rate on the loan was 11.25%. What is the true effective rate? b. What would be the effective cost of the loan if the note required discount interest? c. What would be the nominal annual interest rate on the loan if the bank did not require a compensating balance but required repayment in three equal monthly installments?
Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
Simmons Corporation can borrow from its bank at 21 percent to take a cash discount. The terms of the cash discount are 2.5/14, net 50. Compute the cost of not taking the cash discount. Note: Use a 360-day year. Do not round intermediate calculations. Input your final answer as a percent rounded to 2 decimal places.
Neveready Flashlights Inc. needs $340,000 to take a cash discount of 3/17, net 72. A banker will lend the money for 55 days at an interest cost of $10,400. Question 1 What is the effective rate on the bank loan? Group of answer choices 20.04% 3.06% 4.25% 10% Question 2 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? Group of answer choices 3.0% 97% 6.55% 15% Question 3 Should the firm borrow the money to take the discount? Group of answer choices No Yes I don't know Sometimes Question 4 If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $340,000? Group of answer choices $10,000 $1,000 $100,000 $425,000 Question 5 What would be the effective interest rate in part d if the interest charge for 55 days were $13,000? Should the firm borrow…
i need help working out these problems. Can you please explain in detail? Warren Ford borrowed $15,600 on a noninterest-bearing, simple discount, 60 day note at 4.5%. (assume ordinary 360 days) What is : a) the bank’s discount? b) Warren’s proceeds? c) the effective rate? Round your answer to the nearest hundredth of a percent
Ezze Mattress needs to raise $200,000 for 6 months. The bank quotes a discount interest rate of 7.5% but does not require compensating balances. What is the effective annual interest rate on this loan? Multiple choice question. 7.50% 8.11% 7.84% 7.81%

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

Personal Finance

Finance

ISBN:

9781337669214

Author:

GARMAN

Publisher:

Cengage

SEE MORE TEXTBOOKS