Neveready Flashlights Inc. needs $302,000 to take a cashdiscount of 2/19, net 71. A banker...

Neveready Flashlights Inc. needs $302,000 to take a cash discount of 2/19, net 71. A banker will loan the money for 52 days at an interest cost of $11,800.

a. What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. How much would it cost (in percentage terms) if the firm did not take the cash discount but paid the bill in 71 days instead of 19 days? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

c. Should the firm borrow the money to take the discount?

d. If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $302,000?

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Neveready Flashlights Inc. needs $345,000 to take a cash discount of 2/11, net 76. A banker...

Neveready Flashlights Inc. needs $345,000 to take a cash discount of 2/11, net 76. A banker will loan the money for 65 days at an interest cost of $12,100. a. What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) b. How much would it cost (in percentage terms) if the firm did not take the cash discount but paid...

Neveready Flashlights, Inc. needs $510,000 to take a cash discount of 2/10, net 70. A banker...

Neveready Flashlights, Inc. needs $510,000 to take a cash discount of 2/10, net 70. A banker will loan the money for 60 days at an interest cost of $7,600. a. What is the annual rate on the bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) b. How much would it cost (in percentage terms) if the firm did not take the cash discount, but paid the...

You are Stephen, an investment banker at Goldmen, Inc.. You work long hours but make $2...

You are Stephen, an investment banker at Goldmen, Inc.. You work long hours but make $2 - $3 million a year. That does not include your annual bonus, a percentage of the money you bring into the company. Last year your bonus was $17 million. The year before it was $22 million. You enjoy your lifestyle: the private jet, the beautiful women/men, the finest vacations. Now you’ve met the love of your life, Jackie Onassis. You thought you were rich!...

Newsome Inc. buys on terms of 4/10, net 45. It does not take the discount, and...

Newsome Inc. buys on terms of 4/10, net 45. It does not take the discount, and it generally pays after 55 days. What is the effective (not nominal) annual percentage cost of its non-free trade credit, based on a 365-day year? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Consider this case: Taco Large Inc. needs to take out a one-year bank loan of $550,000...

Consider this case: Taco Large Inc. needs to take out a one-year bank loan of $550,000 and has been offered loan terms by two different banks. One bank has offered a simple interest loan of 10% that requires monthly payments. The loan principal will be paid back at the end of the year. Another bank has offered 7% add-on interest to be repaid in 12 equal monthly installments. Based on a 360-day year, what will be the monthly payment for...

Question 2 COVID-19 pandemic continued to take its toll in many countries and affected the world...

Question 2 COVID-19 pandemic continued to take its toll in many countries and affected the world of work. It has affected labor markets and leading to unprecedented losses in working hours and employment in the UAE, the Ministry of Human Resources and Emiratization Resolution No. 279 of 2020 concerning the employment stability in private sector establishments encourages employers to consider alternative means of reducing staffing cost rather than termination and makes clear that certain measures should be with an employee’s...

consolidated company needs to raise capital. its investment banker suggest that 20-year zero coupon bonds could...

consolidated company needs to raise capital. its investment banker suggest that 20-year zero coupon bonds could be sold at a yield to maturity of 8%. what is the market value of each zero coupon bond using the semi-annual formula? a. $208.29 b. $224.54 c. $204.69 d. $218.52 jon has just issued a 20 year, 10% coupon rate, $1,000 par bond that pays interest semi-annually. the required return is currently 8 percent and the company is certain that it will remain...

# Reading the data into R: my.datafile <- tempfile() cat(file=my.datafile, " 71 15 74 19 70...

# Reading the data into R: my.datafile <- tempfile() cat(file=my.datafile, " 71 15 74 19 70 11 71 15 69 12 73 17 72 15 75 19 72 16 74 18 71 13 72 15 73 17 72 16 71 15 75 20 71 15 75 19 78 22 79 23 72 16 75 20 76 21 74 19 70 13 ", sep=" ") options(scipen=999) # suppressing scientific notation simpbasketball <- read.table(my.datafile, header=FALSE, col.names=c("height", "goals")) COMPUTER CALCULATIONS: I need to...

Adams Manufacturing Inc. buys $11.4 million of materials (net of discounts) on terms of 2/10, net...

Adams Manufacturing Inc. buys $11.4 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo discounts, how much additional credit could it obtain? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent. Use 365 day in a year. ? $ What would be...

Adams Manufacturing Inc. buys $11.9 million of materials (net of discounts) on terms of 2/10, net...

Adams Manufacturing Inc. buys $11.9 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo discounts, how much additional credit could it obtain? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to the nearest cent. $ What would be the nominal and effective cost of...

Subjects