1. Vendors of Trout, Inc. offer Terms of Trade of 3/20 net 60. Vendors are now proposing new terms which would extend the final due date to 75 days.

1. Briefly describe the Terms of Trade currently being offered vendors.

2. What is the Cost of Failing To Take The Discount incurred by Trout, Inc. under its current Terms of Trade ?

3. Briefly discuss your answer to Part b (above) in terms of what this cost tells us.

4. If financiers offer short term loans at a 22% annual Interest Rate, should Trout, Inc. borrow to take advantage of the discount offered under the original terms ? Why or why not ?

5. Again, assuming a 22% annual Interest Rate on short term loans, would Trout, Inc. borrow to take advantage of the discount under the proposed (new) Terms of Trade ? Why or why not ?

1. Compute the cost of not taking the following trade discounts:

1. 2/10 net 40

1. 2/15 net 30

1. 2/10 net 45

1. 3/10 net 180