Answered step by step
Verified Expert Solution
Question
1 Approved Answer
eBook Problem Walk-Through Cash Discounts Suppose a firm makes purchases of $3.942 million per year under terms of 3/10, net 30, and takes discounts. Assume
eBook Problem Walk-Through Cash Discounts Suppose a firm makes purchases of $3.942 million per year under terms of 3/10, net 30, and takes discounts. Assume a 365-day year. Do not round intermediate calculations. a. What is the average amount of accounts payable net of discounts? (Assume that the $3.942 million of purchases is net of discounts - that is, gross purchases are $4,063,917.53, discounts are $121,917.53, and net purchases are $3.942 million.) Round your answer to the nearest dollar. $ b. Is there a cost of the trade credit the firm uses? 1. There is no cost of trade credit at this point. The firm is using "free" trade credit. 11. The cost of the trade credit is $324,000. -Select- c. If the firm did not take discounts but it did pay on the due date, what would be its average payables? Round your answer to the nearest dollar. $ If the firm did not take discounts but it did pay on the due date, what would be its nominal cost? Round your answer to two decimal places % If the firm did not take discounts but it did pay on the due date, what would be its effective cost? Round your answer to two decimal places. d. What would be the firm's cost of not taking discounts if it could stretch its payments to 38 days? Round your answers to two decimal places, Nominal cost: % Effective cost: %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started