Question
Western Inc. is offered a 3/10 net 40 trade discount by its supplier. Western, in the past has been able to get away with paying
Western Inc. is offered a 3/10 net 40 trade discount by its supplier. Western, in the past has been able to get away with paying its suppliers on credit in 60 days. Since it does not have sufficient money on hand to take advantage of the discount it is trying to negotiate a loan from CIBC. The treasurer of Western is seeking a $20,000 loan for 180 days from CIBC. The stated interest rate is 10%, and there is a 15% compensating balance requirement. The treasurer always keeps a minimum of $15,000 in the firms chequing account. These funds could count towards meeting any compensating balance requirements.
Required: Advise Western on what action they should take.
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