Calculate the cost of giving up the cash discount

Assignment Help Financial Management

Reference no: EM131908765

Credit terms Purchases made on credit are due in full by the end of the billing period. Many firms extend a discount for payment made in the first part of the billing period. The original invoice contains a type of shorthand notation that explains the credit terms that apply. (Note: Assume a 365-day year.)

a. Write the shorthand expression of credit terms for each of the following:

1.1% 11 days 38 days Date of invoice

2.3% 8 days 25 days End of Month

1.9% 7 days 35 days Date of invoice

1.9% 8days 50 days End of Month

b. For each of the sets of credit terms in part a, calculate the number of days until full payment is due for invoices dated March 12.

c. For each of the sets of credit terms, calculate the cost of giving up the cash discount.

d. If the firm's cost of short-term financing is 9.9%, what would you recommend in regard to taking the discount or giving it up in each case?

Reference no: EM131908765

Questions Cloud

Firm is proposing to undertake scale expansion : A firm is proposing to undertake a scale expansion. What is the NPV of the project using the weighted average cost of capital?

What is the fund required rate of return : If the market required rate of return is 14 percent and the risk-free rate is 6 percent, what is the fund's required rate of return?

What bid price should you submit on contract : Consider project to supply 118 million postage stamps per year to the U.S. Postal Service for next five year. what bid price should you submit on the contract?

Leaving his job to get mba be smart financial decision : If his real opportunity cost is 8 percent, would leaving his job to get an MBA be a smart financial decision?

Calculate the cost of giving up the cash discount : For each of the sets of credit terms, calculate the cost of giving up the cash discount.

What is the npv break-even level of sales : What is the NPV break-even level of sales if the firm’s tax rate is 40%? What is the NPV break-even level of sales if the firm pays no taxes?

What was the firm end-of-year cash balance : What was the firm's end-of-year cash balance?

Firm economic value added : What was the firm's economic value added (EVA), that is, how much value did management add to stockholders' wealth during 2016?

What do your answers illustrate about eqq model : What do your answers illustrate about EQQ model? Explain.

User Account

All Pages