Accounts payable and take the cash discount

Assignment Help Financial Management

Reference no: EM131068406

AJAX Corp. needs $100,000 for the next 30 days. The company has $100,000 in cash it was expecting to use to pay off accounts payable in order to take advantage of the 2/10 net 40 credit terms. Another source of financing is a short-term bank loan with an interest rate of 20%. Would you recommend AJAX borrow the $100,000 it needs from the bank and use the cash it already has to pay its accounts payable and take the cash discount, or would you recommend the company forgo the cash discount and use the $100,000 it has for its financing needs?

Reference no: EM131068406

Questions Cloud

Corporations can extend their operations : Corporations can extend their operations by: purchasing another corporation's stock. invoking their appraisal rights. selling their voting stocks. getting involved in the process of zoning.

Calculate the value of the firm and the firms equity : The MoMi Corporation’s income before interest, depreciation and taxes, was $3.1 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 19% of pre..

Find the yield rate of this investment strategy : Set up an absolute matching strategy for the payment of $56,000 after one year, $62,500 after two years, $75,600 after three years, and $80,000 after four years if the annual coupon for the one year bond is 2%, for the two year bond 5%, the three yea..

Current assets that could be sold for their book value : A firm has current assets that could be sold for their book value of $24 million. The book value of its fixed assets is $62 million, but they could be sold for $92 million today. The firm has total debt with a book value of $42 million, but interest ..

Accounts payable and take the cash discount : AJAX Corp. needs $100,000 for the next 30 days. The company has $100,000 in cash it was expecting to use to pay off accounts payable in order to take advantage of the 2/10 net 40 credit terms. use the cash it already has to pay its accounts payable a..

What is the annual percentage rate for this financing : Symco Corp. needs $500,000 for 90 days to get through a period of unexpectedly high oil prices. Symco's line of credit with the bank allows the company to borrow at 6% per year with a compensating balance of 10% of the amount borrowed. What is the an..

Cost of borrowing the maximum amount of credit : Bonneau Sunglass Co. is considering the factoring of its receivables. The firm has credit sales of $500,000 per month and has an average receivables balance of $1,000,000 with 60-day credit terms. What is the cost of borrowing the maximum amount of c..

Spot interest rates for maturities : Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 3.9% r2 = 4.5% r3 = 5.2% r4 = 6.0% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next ..

Will the statue of frauds be a valid defence : Chisholm had a written option to purchase 1.862 acres of land out of a 10-acre tract owed by the Cartwrights. The exact piece of property covered by the option was not specified. If Chisholm sues for specific preformance of the option, will the statu..

User Account

All Pages