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Assume that Guizhou Falls Department Store orders inventory and is offered a cash discount by one of their suppliers with the condition 2/10, net 40.
Assume that Guizhou Falls Department Store orders inventory and is offered a cash discount by one of their suppliers with the condition 2/10, net 40. In order for Guizhou Falls to take the cash discount, the company will need temporary financing of $75,000 for 30 days. The local bank offers a loan for 12% per annum (i.e. annual interest) Answer the following questions by entering plain numbers (no currencies, commas or %-signs. don't round during calculations, only round the final amount to 2 decimals) (a) Blank #1: What is the cost of foregoing the cash discount? (b) Blank #2: If Guizhou Falls decides to take the bank loan, how much will they have to pay in interest? (c) Blank #3: What amount would Guizhou Falls need to borrow, if there was a required 8% compensating balance? (d) Blank #4: What would be the interest rate if the interest charge for the offered loan was $937 and if there was a required 8% compensating balance on the loan? (e) Blank #5: Should Guizhou Falls borrow the required amount and realize the cash discount under the conditions in (b)? Only enter either Yes or No. (f) Blank #6: Should Guizhou Falls borrow the required amount and realize the cash discount under conditions in (d)? Only enter either Yes or No
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