Question
In: Finance
COST OF TRADE CREDIT AND BANK LOAN Lancaster Lumber buys $8 million of materials (net of...
COST OF TRADE CREDIT AND BANK LOAN
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30; and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations.
- If Lancaster decides to forgo discounts, how much additional
credit could it obtain? Write out your answer completely. For
example, 5 million should be entered as 5,000,000. Round your
answer to the nearest cent.
$______? - What would be the nominal cost of that credit? Do not round
intermediate calculations. Round your answer to two decimal
places.
=______ % - What would be the effective cost of that credit? Do not round
intermediate calculations. Round your answer to two decimal
places.
=_______% - If the company could get the funds from a bank at a rate of
12%, interest paid monthly, based on a 365-day year, what would be
the effective cost of the bank loan? Do not round intermediate
calculations. Round your answer to two decimal places.
=_______ % - Should Lancaster use bank debt or additional trade
credit?
=Bank debt OR Additional trade credit ?
Solutions
jeff jeffy answered 6 months agoRelated Solutions
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 75;...
Lancaster Lumber buys $8 million of materials (net of discounts)
on terms of 3/5, net 75; and it currently pays on the 5th day and
takes discounts. Lancaster plans to expand, which will require
additional financing. Assume 365 days in year for your
calculations.
If Lancaster decides to forgo discounts, how much additional
credit could it obtain? Write out your answer completely. For
example, 5 million should be entered as 5,000,000. Round your
answer to the nearest cent.
What would...
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 60;...
Lancaster Lumber buys $8 million of materials (net of discounts)
on terms of 3/5, net 60; and it currently pays on the
5th day and takes discounts. Lancaster plans to expand,
which will require additional financing. Assume 365 days in year
for your calculations.
If Lancaster decides to forgo discounts, how much additional
credit could it obtain? Write out your answer completely. For
example, 5 million should be entered as 5,000,000. Round your
answer to the nearest cent.
$
What...
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 85;...
Lancaster Lumber buys $8 million of materials (net of discounts)
on terms of 3/5, net 85; and it currently pays on the
5th day and takes discounts. Lancaster plans to expand,
which will require additional financing. Assume 365 days in year
for your calculations.
If Lancaster decides to forgo discounts, how much additional
credit could it obtain? Write out your answer completely. For
example, 5 million should be entered as 5,000,000. Round your
answer to the nearest cent.
$
What...
Lancaster Lumber buys $8 million of materials (net of discounts) on terms 3/5, net 55, and...
Lancaster Lumber buys $8 million of materials (net of discounts)
on terms 3/5, net 55, and it currently pays on the 5th day and
takes discounts. Lancaster plans to expand, which will require
additional financing. If Lancaster decides to forgo discounts, how
much additional credit could it obtain, and what would be the
nominal and effective cost of that credit? If the company could get
the funds from a bank at a rate of 9%, interest paid monthly, based
on...
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...
Leyton Lumber Company has sales of $8 million per year, all on credit terms calling for...
Leyton Lumber Company has sales of $8 million per year, all on
credit terms calling for payment within 30 days, and its accounts
receivable are $1.6 million. Assume 365 days in year for your
calculations.
What is Leyton's DSO? Round your answer to two decimal
places.
What would DSO be if all customers paid on time? Round your
answer to two decimal places.
How much capital would be released if Leyton could take actions
that led to on-time payments? Round...
Quantitative Problem: Adams Manufacturing Inc. buys $8.5 million of materials (net of discounts) on terms of...
Quantitative Problem: Adams Manufacturing Inc. buys $8.5 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...
Quantitative Problem: Adams Manufacturing Inc. buys $9 million of materials (net of discounts) on terms of...
Quantitative Problem: Adams Manufacturing Inc.
buys $9 million of materials (net of discounts) on terms of 2/10,
net 60; 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? Round your answer to the nearest cent. Do
not round intermediate calculations. Use 365 day in a year.
$
What would be the nominal and effective cost of...
Quantitative Problem: Adams Manufacturing Inc. buys $10.8 million of materials (net of discounts) on terms of...
Quantitative Problem: Adams Manufacturing Inc.
buys $10.8 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 a 365-day year.
$
What would be the...
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