Question
Adams Manufacturing Inc. buys $8.9 million of materials (net of discounts) on terms of 2/10, net 60; and it currently pays after 10 days and
Adams Manufacturing Inc. buys $8.9 million of materials (net of discounts) on terms of 2/10, net 60; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo discounts, how much additional credit could it obtain? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent. Use 365 day in a year.
$
What would be the nominal and effective cost of such a credit? Do not round intermediate calculations. Round your answers to two decimal places. Use 365 day in a year.
Nominal cost: %
Effective cost: %
If the company could receive the funds from a bank at a rate of 7.45%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places.
%
Should Adams use bank debt or additional trade credit?
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