You have been hired by Coming Up Roses, a local greenhouse and nursery, to handle their accounts payable.  Recently they placed a substantial order from Proven Winners for several varieties of perennials they do not grow from seed and the invoice had the terms of 5/15, n/45.  The order amounted to $215,000.  Coming Up Roses can borrow money from the local bank at 8½% ordinary interests.How much can Coming Up Roses save by borrowing the funds for 30 days to take advantage of the cash discount?

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Asked Nov 20, 2019
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You have been hired by Coming Up Roses, a local greenhouse and nursery, to handle their accounts payable.  Recently they placed a substantial order from Proven Winners for several varieties of perennials they do not grow from seed and the invoice had the terms of 5/15, n/45.  The order amounted to $215,000.  Coming Up Roses can borrow money from the local bank at 8½% ordinary interests.

  1. How much can Coming Up Roses save by borrowing the funds for 30 days to take advantage of the cash discount?
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If payment for 15 days:

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Discount $215,000 x 5% = $10,750 Remaining amount $215,000 $10,750 = $204,250

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