Question

In: Finance

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?

a.$9,922.81

b.$9,838.27

c.$98.40

d.$9,000.00

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

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?
Your supplier has just revised your trade credit terms so that if you pay by day...
Your supplier has just revised your trade credit terms so that if you pay by day 5 then the annualized cost of the trade credit discount is 7% if you do not pay by day 5 then you must pay by day 10 your firm has an annual opportunity cost rate of 8% when should you repay the trade credit obligation
Trade Credit 20-10. Legacy Enterprises received an invoice from its supplier. The terms of credit were...
Trade Credit 20-10. Legacy Enterprises received an invoice from its supplier. The terms of credit were stated as 3/15, n45. Calculate the effective annual interest rate on the trade credit. Commercial Paper 20-11. Callaway Krugs issues $2,000,000 in commercial paper for 90 days at a 3.8 percent discount yield. Calculate each of the following. a.  Dollar amount of the discount b.  Price of the commercial paper c.  Effective annual interest rate on the commercial paper Effective Interest Rate 20-12. Lugash wants to buy...
The Dithers Company's major supplier had been extending credit on Terms Of Trade 2/10 net 30....
The Dithers Company's major supplier had been extending credit on Terms Of Trade 2/10 net 30. Dithers takes all discounts as a matter of policy.   a. Please describe the Terms of Trade presented above.      b. What is the Cost of Failing To Take the Discount for Dithers based on the Terms of Trade referenced above ? (Be sure to show all computations).       c.. How might Dithers' Balance Sheet change if the supplier switches to Terms of Trade Net 30 ?...
Your company’s primary supplier has decided to change its credit terms from 1/10 net 60 to 2/10 net 30.
Your company’s primary supplier has decided to change its credit terms from 1/10 net 60 to 2/10 net 30. Assuming that you can borrow from the bank at a stated interest rate of 9.5%, which of the following statements is true?a) Your company shouldn’t take the discount under the new terms; you did take the discount under the old terms.b) Your company should take the discount under the new terms; you didn’t take the discount under the old terms.c) Your...
38. A company has daily purchases of $10,000 from its supplier. The supplier offers trade credit...
38. A company has daily purchases of $10,000 from its supplier. The supplier offers trade credit under the following terms: 3/20, net 50 days. The company finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the company’s free trade credit? $30,000 $170,000 $200,000 $300,000 39. Based on the information from Question 38, what is the average level of the company’s...
A customer applies for credit at your firm. Your terms are net 35 days. The customer’s...
A customer applies for credit at your firm. Your terms are net 35 days. The customer’s D&B report reveals that he pays on the net date only 10% of the time. He pays 30 days late 60% of the time, he pays 60 days late 20% of the time, and he pays 90 days late 10% of the time (with necessary assistance being provided by a collection agency). The item he wishes to buy has an invoice price of $2,000...
A firm offers credit terms of 3/10, net 35. What is the effective annual rate on...
A firm offers credit terms of 3/10, net 35. What is the effective annual rate on the credit extended if a customer foregoes the discount on a $10,000 purchase? Assume that there are 365 days in one year. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit the % sign in your response. For example, an answer of 15.39% should be entered as 15.39.)
Management at Firm X is considering switching from terms of cash only sales to trade credit...
Management at Firm X is considering switching from terms of cash only sales to trade credit terms of net 30 days, in an effort to increase sales. The table below shows projected financial information for the proposed trade credit terms and current cash terms. Based on this information, calculate the Trade Credit Value Added associated with the change in trade credit policy and make a recommendation. Assume that the first transaction would occur today, followed by monthly sales in perpetuity....
Cost of Trade Credit Grunewald Industries sells on terms of 3/10, net 30. Gross sales last...
Cost of Trade Credit Grunewald Industries sells on terms of 3/10, net 30. Gross sales last year were $4,964,000 and accounts receivable averaged $476,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate daily sales based on a 365-day year, calculate the average receivables for discount customers, and then find the DSO for the nondiscount customers.) Do not round intermediate calculations....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT