A farmer purchases $500 per day of input supply, 360 days per year. This totals annual...

A farmer purchases $500 per day of input supply, 360 days per year. This totals annual purchases of $180,000. If the farmer takes the early payment discount, he saves 3% of $180,000, or $5,400. Since the farmer always pays each invoice on the tenth day, there will be $5,000 owed in accounts payable at all times.

1) If the farmer pays all invoices on the thirtieth day, the balance in accounts payable is:

2) If the farmer pays all invoices on the thirtieth day, he has obtained an additional financing of:

3) If the farmer pays all invoices on the thirtieth day, his balance in accounts payable will increase. What is the approximate interest rate on this financing?

Expert Solution

jeff jeffy answered 10 months ago

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