INTERMEDIATE FINAN...-MINDTAP(1 TERM)
14th Edition
ISBN: 9780357516720
Author: Brigham
Publisher: CENGAGE L
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Chapter 21, Problem 15P
Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts.
- a. What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.)
- b. Is there a cost of the trade credit the firm uses?
- c. If the firm did not take discounts but did pay on the due date, what would be its average payables and the cost of this nonfree trade credit?
- d. What would be the firm’s cost of not taking discounts if it could stretch its payments to 40 days?
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Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts.
What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.)
Is there a cost of the trade credit the firm uses?
If the firm did not take discounts but did pay on the due date, what would be its average payables and the nominal and effective costs of this nonfree trade credit?
What would be the firm’s nominal and effective costs of not taking discounts if it could stretch its payments to 40 days?
(16-15)
Cash Discounts
Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and
takes discounts.
a. What is the average amount of accounts payable net of discounts? (Assume the
$3.65 million of purchases is net of discounts-that is, gross purchases
are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.)
b. Is there a cost of the trade credit the firm uses?
c. If the firm did not take discounts but did pay on the due date, what would be its
average payables and the cost of this nonfree trade credit?
d. What would be the firm's cost of not taking discounts if it could stretch its payments
to 40 days?
Would you only answer the last question please Thank you !
Chapter 21 Solutions
INTERMEDIATE FINAN...-MINDTAP(1 TERM)
Ch. 21 - a. Working capital; net working capital; net...Ch. 21 - Prob. 2QCh. 21 - Is it true that, when one firm sells to another on...Ch. 21 - What are the four elements of a firm’s credit...Ch. 21 - Prob. 5QCh. 21 - Prob. 6QCh. 21 - Prob. 7QCh. 21 - Is it true that most firms are able to obtain some...Ch. 21 - What kinds of firms use commercial paper?Ch. 21 - Prob. 1P
Ch. 21 - Medwig Corporation has a DSO of 17 days. The...Ch. 21 - What are the nominal and effective costs of trade...Ch. 21 - A large retailer obtains merchandise under the...Ch. 21 - A chain of appliance stores, APP Corporation,...Ch. 21 - Prob. 6PCh. 21 - Calculate the nominal annual cost of nonfree trade...Ch. 21 - Prob. 8PCh. 21 - Grunewald Industries sells on terms of 2/10, net...Ch. 21 - The D.J. Masson Corporation needs to raise...Ch. 21 - Negus Enterprises has an inventory conversion...Ch. 21 - Strickler Technology is considering changes in its...Ch. 21 - Dorothy Koehl recently leased space in the...Ch. 21 - Suppose a firm makes purchases of $3.65 million...Ch. 21 - The Thompson Corporation projects an increase in...Ch. 21 - The Raattama Corporation had sales of $3.5 million...Ch. 21 - Karen Johnson, CFO for Raucous Roasters (RR), a...Ch. 21 - Prob. 2MCCh. 21 - Prob. 3MCCh. 21 - Prob. 4MCCh. 21 - Prob. 5MCCh. 21 - Prob. 6MCCh. 21 - Prob. 7MCCh. 21 - Prob. 8MCCh. 21 - What is the impact of higher levels of accruals,...Ch. 21 - Prob. 10MCCh. 21 - Prob. 11MCCh. 21 - Prob. 12MCCh. 21 - Prob. 13MCCh. 21 - Prob. 14MCCh. 21 - Prob. 15MCCh. 21 - Prob. 16MC
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