Rework parts a through d of Problem 22-9 using a spreadsheet model. Answer the following questions: a.

Question:

Rework parts a through d of Problem 22-9 using a spreadsheet model. Answer the following questions:

a. How large would the accounts payable balance be if Malone takes discounts? If it does not take discounts and pays in 30 days?

b. How large must the bank loan be if Malone takes discounts? If Malone doesn't take discounts?

c. What are the nominal and effective costs of costly trade credit? What is the effective cost of the bank loan? Based on these costs, what should Malone do?

d. Assume Malone forgoes the discount and borrows the amount needed to become current on its payables. Construct a projected balance sheet based on this decision.

e. Using interest rates in the range of 5% to 25% and compensating balances in the range of 0% to 30%, perform a sensitivity analysis that shows how the size of the bank loan would vary with changes in the interest rate and the compensating balance percentage.

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...