Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Burt's Department Store needs $687,000 to take a cash discount of 1.50/15, net 70. A banker will loan the money for 55 days at an

image text in transcribed
image text in transcribed
Burt's Department Store needs $687,000 to take a cash discount of 1.50/15, net 70. A banker will loan the money for 55 days at an interest cost of $20,800. a. What is the annual rate on the bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate % b. How much would it cost (in percentage terms) if Burt's did not take the cash discount and paid the bill in 70 days instead of 15 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount () % c. Should Burt's borrow the money to take the discount? Yes 0 No d. If the banker requires a 10 percent compensating balance, how much must Burt's borrow to end up with the $687,000 ? (Round the final answer to the nearest whole dollar.) Amount to be borrowed $ e-1. What would be the interest rate in part d if the interest charge for 55 days were $23,500 ? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate \% b. How much would it cost (in percentage terms) if Burt's did not take the cash discount and paid the bill in 70 days instead of 15 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount () % c. Should Burt's borrow the money to take the discount? Yes 0 No d. If the banker requires a 10 percent compensating balance, how much must Burt's borrow to end up with the $687,000 ? (Round the final answer to the nearest whole dollar.) Amount to be borrowed $ e-1. What would be the interest rate in part d if the interest charge for 55 days were $23,500 ? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate % e-2. Should Burt's borrow with the 10 percent compensating balance? (There are no funds to count against the compensating balance requirement.) No 0 Yes

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

What steps should be taken to address any undesirable phenomena?

Answered: 1 week ago