MyLab Finance with Pearson eText -- Access Card -- for Corporate Finance (Myfinancelab)
4th Edition
ISBN: 9780134099170
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Question
Chapter 26, Problem 13P
Summary Introduction
To determine: Whether Person S has to take the loan and get the benefits from discounts offered.
Introduction:
Trade credit is an offering given by the suppliers to the firm. When supplier agrees to deliver the products and gives a specified time period for the payment, the supplier will tend to give some sort of percentage as a credit discount to the firm, if the payment is made within the specific period.
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Students have asked these similar questions
Simple Simon’s Bakery purchases supplies on terms of 1/10, Net 25. If Simple Simon’s chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon’s owner an interest rate of 12% on borrowed funds and no origination fees. Should Simple Simon’s enter the loan agreement with the bank in order to begin taking the discount?
Simple Simon's Bakery purchases supplies on terms of
1.5/10, net 30.
If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of
10.9%
on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use 365 days for a year.)
A firm is offered credit terms of 2/10 net 45 by most of its suppliers. The firm also has a credit line available at a local bank at an interest rate of 12 percent.
What is the cost of giving up the cash discount?
Should the company take the cash discount or finance the purchase with the line of credit?
Chapter 26 Solutions
MyLab Finance with Pearson eText -- Access Card -- for Corporate Finance (Myfinancelab)
Ch. 26.1 - What is the firms cash cycle? How does it differ...Ch. 26.1 - How does working capital impact a firms value?Ch. 26.2 - Prob. 1CCCh. 26.2 - Prob. 2CCCh. 26.3 - Prob. 1CCCh. 26.3 - Prob. 2CCCh. 26.4 - What is accounts payable days outstanding?Ch. 26.4 - What are the costs of stretching accounts payable?Ch. 26.5 - What are the benefits and costs of holding...Ch. 26.5 - Prob. 2CC
Ch. 26.6 - Prob. 1CCCh. 26.6 - Prob. 2CCCh. 26 - Prob. 1PCh. 26 - Prob. 2PCh. 26 - Aberdeen Outboard Motors is contemplating building...Ch. 26 - Prob. 4PCh. 26 - Prob. 5PCh. 26 - Prob. 6PCh. 26 - The Fast Reader Company supplies bulletin board...Ch. 26 - Prob. 8PCh. 26 - Prob. 9PCh. 26 - Prob. 10PCh. 26 - The Mighty Power Tool Company has the following...Ch. 26 - What is meant by stretching the accounts payable?Ch. 26 - Prob. 13PCh. 26 - Your firm purchases goods from its supplier on...Ch. 26 - Use the financial statements supplied on the next...Ch. 26 - Prob. 16PCh. 26 - Which of the following short-term securities would...
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