Question
Simmons Corp. can borrow from its bank at 18 percent to take a cash discount. The terms of the cash discount are 2.5/10, net 75.
| Simmons Corp. can borrow from its bank at 18 percent to take a cash discount. The terms of the cash discount are 2.5/10, net 75. |
| a. | Compute the cost of not taking the cash discount. (Use a 360-day year. Do not round intermediate calculations. Input your final answer as a percent rounded to 2 decimal places.) |
| Cost of not taking a cash discount | % |
| b. | Should the firm borrow the funds? | ||||
|
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Handbook Of The Economics Of Finance Corporate Finance Volume 1A
Authors: George M. Constantinides, M. Harris, Rene M. Stulz
1st Edition
0444513620, 978-0444513625
