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 9 months ago

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