Question
In: Accounting
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 the bill in 76
days instead of 11 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?
| No | |
| Yes |
d. If the banker requires a 20 percent
compensating balance, how much must the firm borrow to end up with
the $345,000?
e-1. What would be the effective interest rate in
part d if the interest charge for 65 days were $11,400?
(Use a 360-day year. Do not round intermediate
calculations. Input your answer as a percent rounded to 2 decimal
places.)
e-2. Should the firm borrow with the 20 percent
compensating balance requirement? (The firm has no funds to count
against the compensating balance requirement.)
| Yes | |
| No |
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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