3 & 4

B. If you choose to do business with only one of these suppliers, which one would you choose? Explain why. C. Your four suppliers offer the terms outlined below. Determine if your firm should take the cash discount offered or pay at the end of the Credit Period for each situation. . Assume: The firm has no access to short-term credit. Ifi krc, the firm should keep the cash invested. . Supplier 1 Supplier 2 Supplier 3 Supplier 4 1.5/15, net 50 1/10, net 60 5/5, net 45 2/10, net 30 Discount Period (DP) 10 10 Credit Period (CP) 15 50 1.5%. 60 1.0% 5 45 5.0% 30 2.0% Cash Discount Rate (d) Annual Investment Opportunity Rate (i) 10% 10% 10% 10% Annual Borrowing Rate (1) N/A NA NA NA Annualized Cash Discount Rate (krc) 16% 7% 48% 37% [2/(1-2)][365/(CP-DP)] Take Discount (Y / N) y N Y 3. Using the same information from Question 2, determine if the firm should borrow to take the discount . Assume: The firm has access to short-term credit at 8%. If the iskrc, the firm should borrow to take the discount. If the it > krc, the firm should forego the discount. . . Supplier Supplier 2 Supplier Supplier 1.5/15, met 50 1/10, set 0 55, net 45 2/10, et 30 Annual Borrowing Rale (1) Annualized Cash Discount Rate (krc) Id 1-2][365CP-DP) Barrow To Take Discount (Y/N 4. Look up the current Prime Rate and 30-day Commercial Paper rate online or in the paper. Compare each to the annualized cash discount rate (krc) for 2/10, net 30. Evaluate whether to borrow at the current Prime or Commercial Paper rates or take the discount calculated above for the 2/10, net 30 offer made by Supplier 4. B. If you choose to do business with only one of these suppliers, which one would you choose? Explain why. C. Your four suppliers offer the terms outlined below. Determine if your firm should take the cash discount offered or pay at the end of the Credit Period for each situation. . Assume: The firm has no access to short-term credit. Ifi krc, the firm should keep the cash invested. . Supplier 1 Supplier 2 Supplier 3 Supplier 4 1.5/15, net 50 1/10, net 60 5/5, net 45 2/10, net 30 Discount Period (DP) 10 10 Credit Period (CP) 15 50 1.5%. 60 1.0% 5 45 5.0% 30 2.0% Cash Discount Rate (d) Annual Investment Opportunity Rate (i) 10% 10% 10% 10% Annual Borrowing Rate (1) N/A NA NA NA Annualized Cash Discount Rate (krc) 16% 7% 48% 37% [2/(1-2)][365/(CP-DP)] Take Discount (Y / N) y N Y 3. Using the same information from Question 2, determine if the firm should borrow to take the discount . Assume: The firm has access to short-term credit at 8%. If the iskrc, the firm should borrow to take the discount. If the it > krc, the firm should forego the discount. . . Supplier Supplier 2 Supplier Supplier 1.5/15, met 50 1/10, set 0 55, net 45 2/10, et 30 Annual Borrowing Rale (1) Annualized Cash Discount Rate (krc) Id 1-2][365CP-DP) Barrow To Take Discount (Y/N 4. Look up the current Prime Rate and 30-day Commercial Paper rate online or in the paper. Compare each to the annualized cash discount rate (krc) for 2/10, net 30. Evaluate whether to borrow at the current Prime or Commercial Paper rates or take the discount calculated above for the 2/10, net 30 offer made by Supplier 4