Cupcakes Inc needs $500,000 to take a cash discounts of 2/10 net 45.They are considering 3 options
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Cupcakes Inc needs $500,000 to take a cash discounts of 2/10 net 45.They are considering 3 options so they can take advantage of the discount.
A bank loan for 35 days at an interest cost of $6,000
A loan with a 15% compensating balance and a quoted rate of 14%
A line of credit with an interest rate of 12% and an annual commitment fee of three quarters of one percent of the limit.What is the annual cost of a line of credit with a $500,000 limit borrowed for 35 days.
Calculate the cost of not taking the discount and for each option find the cost as an annual simple interest rate and state whether it would be worthwhile.Which is the best option?
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