Question

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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 ago
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