Answer Question 6

Question 6 Company ABC manufactures stoneware. Supplier LMN provides raw materials to Company ABC under the credit terms of 3/15 net 60. = 10934200 25%. 25. of marks) 100% 3% a) Determine the cost of giving up the cash discount from Supplier LMN. Your answer should be in percentage and rounded to two 2 decimal places. 392 365 60-15 009717 b) Bank XYZ offers short-term financing to Company ABC at a premium of 4% above PRIME. If the current PRIME rate is 8%p.a., what is the cost of bank borrowing for Company ABC? Your answer should be in percentage and rounded to two 2 decimal places. (3 marks) c) Given your answers in (a) and (b), should Company ABC take up the cash discount from Supplier LMN? If the invoice amount is $120,000, determine when and how much should Company ABC pay. (4 marks)