Answered: iscount offered and pays the suppliers…

iscount offered and pays the suppliers 5 days after the due date, what is the annual intere te cost (Use 360-day year)? ut percentage sign e.g. XX.XX%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 10MC

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

Bulldogs Inc. is given terms of 2/10, net 45 by its suppliers. If Bulldogs Inc. forgoes the cash
discount offered and pays the suppliers 5 days after the due date, what is the annual interest
rate cost (Use 360-day year)?
Put percentage sign e.g. XX.XX%

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