Question
In: Finance
15. Total Ghana has a temporary need for funds. Management is trying to decide between taking...
15. Total Ghana has a temporary need for funds.
Management is trying to decide between taking discounts from one of
their suppliers or a 14.75% per annum renewable discount loan from
its bank for 3 months. The suppliers' terms are as follows. GNPC
1/10, net 30. BOST 2/15, net 60. Tema Oil Refinery net 90. Assume
360-day year, the cheapest source of short-term financing is
*
(a) The bank
(b) GNPC
(c) BOST
(d) Tema Oil refinery
Solutions
Expert Solution
Based on the given data, pls find below workings;
It is evident from the discount norms that Tema Oil norms is the cheapest, as the discount norms are "Net 90"; It means that till 90 days the credit period is available and at 90 days, the entire amount MUST be paid back; Since the requirement is for short term financing for 3 months, the Tema Oil is the cheapest source of financing.
Also, pls find below the workings for all the options:
jeff jeffy answered 1 year agoRelated Solutions
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