Question
Uptown Hospital buys supplies each year from its major supplier, Downtown Medical Supplies, which offers Uptown Hospital terms of 2/10 net 30. Currently, the hospital
Uptown Hospital buys supplies each year from its major supplier, Downtown Medical Supplies, which offers Uptown Hospital terms of 2/10 net 30. Currently, the hospital is paying the supplier the full amount due on day 30, but it is considering taking the discount, paying on day 10, and replacing the trade credit with a bank loan that has a 9 percent interest rate.
(a). Using the sheet entitled "Cost of Trade Credit", compute the approximate annual interest cost of the trade credit (i.e., the interest cost of not taking a discount).
Uptown Hospital buys supplies each year from its major supplier, Downtown Medical Supplies, which offers Uptown Hospital terms of 2/10 net 30. Currently, the hospital is paying the supplier the full amount due on day 30, but it is considering taking the discount, paying on day 10, and replacing the trade credit with a bank loan that has a 9 percent interest rate.
(b). Should Uptown Hospital replace the trade credit with the bank loan? Explain your answer
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