Question
To finance additional inventory, Arbutus Ltd. is considering forgoing the cash discount on all of its purchases currently offered on terms of 2/10, net 45.
To finance additional inventory, Arbutus Ltd. is considering forgoing the cash discount on all of its purchases currently offered on terms of 2/10, net 45. No payments will be stretched. Annual purchases are $9.21 million.
a. Calculate the additional financing available to Arbutus Ltd. by forgoing the cash discount. (Use 365 days in a year. Do not round intermediate calculations. Enter answer in whole dollar, not in millions. Don't discount gross purchases to arrive at the accounts payable positions.)
Additional financing available $
b. Calculate the annual cost of forgoing the cash discount. (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Cost of lost discount %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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