Question

In: Finance

Orange Turtle Group buys on terms of 3.5/15, net 45 from its chief supplier. If Orange...

Orange Turtle Group buys on terms of 3.5/15, net 45 from its chief supplier.

If Orange Turtle receives an invoice for $1,545.78, what would be the true price of this invoice?

a. $1,491.68

b. $1,267.93

c. $1,118.76

d. $1,044.18

The nominal annual cost of the trade credit extended by the supplier is _____.

a. 43.29%

b. 36.66%

c. 39.75%

d. 44.17%

The effective annual rate of interest on trade credit is _______.

a. 63.72%

b. 44.82%

c. 54.00%

d. 55.08%

Suppose Orange Turtle does not take advantage of the discount and then chooses to pay its supplier late. On average, Orange Turtle will pay its supplier on the 50th day after the sale. As a result, Orange Turtle can decrease its nominal cost of trade credit by _____ by paying late.

a. 11.99

b. 7.26

c. 11.36

d. 6.31

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 8 months ago
Next > < Previous

Related Solutions

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.
The Reynolds Corporation buys from its suppliers on terms of 2/17, net 65. Reynolds has not...
The Reynolds Corporation buys from its suppliers on terms of 2/17, net 65. Reynolds has not been utilizing the discounts offered and has been taking 65 days to pay its bills. Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 15 percent. The bank requires a 10 percent compensating balance on these loans. Current account balances would not...
The Reynolds Company buys from its suppliers on terms of 2/10, net 58. Reynolds has not...
The Reynolds Company buys from its suppliers on terms of 2/10, net 58. Reynolds has not been utilizing the discount offered and has been taking 70 days to pay its bills. The suppliers seem to accept this payment pattern, and Reynold’s credit rating has not been hurt. Mr. Duke, Reynolds Company’s vice-president, has suggested that the company begin to take the discount offered. Mr. Duke proposes the company borrow from its bank at a stated rate of 11 percent. The...
The Reynolds Corporation buys from its suppliers on terms of 2/18, net 50. Reynolds has not...
The Reynolds Corporation buys from its suppliers on terms of 2/18, net 50. Reynolds has not been utilizing the discounts offered and has been taking 50 days to pay its bills. Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 18 percent. The bank requires a 15 percent compensating balance on these loans. Current account balances would not...
The Reynolds Corporation buys from its suppliers on terms of 3/18, net 55. Reynolds has not...
The Reynolds Corporation buys from its suppliers on terms of 3/18, net 55. Reynolds has not been utilizing the discounts offered and has been taking 55 days to pay its bills. Mr. Duke, Reynolds Corporation vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 18 percent. The bank requires a 10 percent compensating balance on these loans. Current account balances would not...
The Reynolds Corporation buys from its suppliers on terms of 2/18, net 50. Reynolds has not...
The Reynolds Corporation buys from its suppliers on terms of 2/18, net 50. Reynolds has not been utilizing the discounts offered and has been taking 50 days to pay its bills.    Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 18 percent. The bank requires a 15 percent compensating balance on these loans. Current account balances would...
The Reynolds Corporation buys from its suppliers on terms of 2/11, net 60. Reynolds has not...
The Reynolds Corporation buys from its suppliers on terms of 2/11, net 60. Reynolds has not been utilizing the discounts offered and has been taking 60 days to pay its bills. Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 16 percent. The bank requires a 12 percent compensating balance on these loans. Current account balances would not...
2.   The credit terms are; 3/15 with a net date of 45 days (show work): a....
2.   The credit terms are; 3/15 with a net date of 45 days (show work): a. Calculate the interest savings associated with taking this discount: b. The Notes Payable or short-term borrowing rate is 5%. Should the discount be taken? c. Given your answer in part b, when should the purchasing company pay the bill?
AutoNation Inc purchases $3,500,000 in goods per year from its sole supplier on terms of 5/15...
AutoNation Inc purchases $3,500,000 in goods per year from its sole supplier on terms of 5/15 net 55. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit (Assume a 365-day year)?
Tech Industries sells on terms 2/15, net 45. Total sales for the year are $1,200,000. Forty...
Tech Industries sells on terms 2/15, net 45. Total sales for the year are $1,200,000. Forty percent of customers pay on the 15th day and takes discounts, the other 60% pay on average, 50 days after their purchases. Support your below answers showing the calculations. What is the days sales outstanding? What is the average amount of receivables? What would happen to average receivables if Tech industries toughened its collection policy with the result that all non-discount customers paid on...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT