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Your firm just purchased $10,000 in goods from your supplier on trade credit terms of  0.5/10 net...

Your firm just purchased $10,000 in goods from your supplier on trade credit terms of  0.5/10 net 60.  Your opportunity cost of funds is 10%.  What is the PV of waiting the 60 days to make payment?

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Expert Solution

Solution:-

Given,

Goods purchased = $10,000

Oppurtunity cost = 10% or 0.1

Time period = 60 days

Present value * (1+rate)time = Future value

P.V * [1+0.1*(60/365)]1 = $10,000

P.V * (1+0.01643) = $10,000

P.V * 1.01643 = $10,000

P.V = $10,000 / 1.01643

= $9,838.3558

Therefore the Present value is $9,838.3558

jeff jeffy answered 2 years ago
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