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The Bain Company has several financial issues to solve. As the companys Financial Analyst you have been asked to answer the following 2 questions:

Their bank will lend them $50,000 for 110 days at a cost of $1,000 interest. What is the companys effective annual rate?

A major supplier has granted credit terms of 3/5 N160. Assuming the company can borrow any amount of money at the rate you have calculated above (in part 1), should the company take the discount? (Your answer must be supported with a calculation of the cost of not taking the discount using either simple or effective annual rate)