Question
ABC Ltd. has imported goods to the extent of US$ 8 Million. The payment terms are as under: (1)1% discount if full amount is paid
ABC Ltd. has imported goods to the extent of US$ 8 Million. The payment terms are as under:
(1)1% discount if full amount is paid immediately or
(2)60 days interest free credit. However, in case of a further delay up to 30 days, interest at th e rate of 8% p.a. will be charged for additional days after 60days. M/sXYZLtd. has` 25 Lakh available and for remaining it has an offer from bank for a loan up to 90 days @ 9.0%p.a.
The quotes for foreign exchange are as follows:
Spot Rate INR/ US$ (buying) 66.98
60 days Forward Rate INR/ US$ (buying) 67.16
90 days Forward Rate INR/ US$ (buying) 68.0
Advise which one of the following options would be better for XYZ Ltd.
(i)Pay immediately after utilizing cash available and for balance amount take 90 days loan from bank.
(ii)Pay the supplier on 60th day and avail bank's loan (after utilizing cash) for 30 days.
(iii)Avail supplier offer of 90 days credit and utilize cash available.
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