Reference no: EM132768331

Question - Activity 1: As the credit and collection manager of LGH Company, determine among the following cases the credit scheme that you will take where in the company will benefit from the lowest cost of credit possible by computing their effective rates. Explain your answer.

Credit A - Php 5,000,000 with a nominal rate of 10%. The principal and the interest payable at the end of the year.

Credit B - Php 5,000,000 with a nominal rate of 10% and a service charge fee of 5% which will be deducted from the cash loan upon receipt. The net proceeds and the interest payable at the end of the year.

Credit C - Php 5,000,000 but with the interest of Php500,000 which will be deducted upon receipt of cash loan. The net proceeds of Php 4,500,000 shall be paid at the end of the year.

Activity 3: Calculate the cost of credit when the discounts are foregone in the following terms:

a. 10/50 N 100

b. 20/100 N 180

c. 2/10 N 30

d. 5/15 N 50

e. 2/5 N 30