Brembo, an Italian automotive braking-systems supplier, has three alternative carbon ceramic suppliers, all of which offer different terms.

Except for the different credit terms, their products are identical. The credit terms offered by these suppliers are shown in the following table.

a. Calculate the approximate cost of giving up the cash discount from each supplier.

b. If the firm needs short-term funds, which are currently available from Banca Mediolanum at 9%, and if each of the suppliers is viewed separately, which of the suppliers’ cash discounts should the firm give up? Explain why.

c. Now assume the firm could stretch by 20 days the accounts payable (net periods only) from the supplier, Nordex. What impact, if any, would that have on your answer in part b relative to this supplier?

Transcribed Image Text:

Supplier SGL Carbon Nordex Hexcel 2017 1/15 net 60 EOM 2/20 net 90 EOM 2/10 net 90 EOM