4. a) Kean Bookstore makes purchases on terms 2/10 net 35, and takes the discount.

i. If its annual purchases amount to $7,300,000 what will be the Bookstores average Accounts Payable

? ii. If the bookstore decides not to take the discount what will be its average accounts payable.

b) i Suppose the purchase terms are changed to 2/10 net 70, and purchases amount to $5,475,000 calculate the amount of trade credit or (Accounts Payable), if the firm does not take the discount. ii.

Calculate the cost of not taking the discount if the Bookstore does not take the discount. iii If the interest rate on short-term loans is 35% should the Bookstore take the discount or not?

c) What constitutes Free Trade Credit? Cost of Non-Free Trade Credit = ( %Discount) * (365) (100 - %Disc) (CP DP) CP Credit Period; DP Discount Period