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Yosef Traders, a merchandising firm, purchases merchandise from its suppliers on credit terms 2/10, net 30. The business needs cash, so it is considering two
Yosef Traders, a merchandising firm, purchases merchandise from its suppliers on credit terms 2/10, net 30. The business needs cash, so it is considering two alternatives. Alternative 1: Obtain a short-term loan from a bank at an effective interest rate of 12%. Alternative 2: Forego the discount on its credit purchases and pay on the 30th day of the term. Assume a 360-day year.
a. Compute the costs attributable to each alternative, respectively.
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