Calculate the cost of not taking cash discount

Assignment Help Financial Management
Reference no: EM132016069

The Reynolds Corporation buys from its suppliers on terms of 3/17, net 45. Reynolds has not been utilizing the discounts offered and has been taking 45 days to pay its bills.

Mr. Duke, Reynolds Corporation vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 16 percent. The bank requires a 20 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement.

A. Calculate the cost of not taking a cash discount. (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

B. What is the effective rate of interest on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Reference no: EM132016069

Questions Cloud

Determine the approximate yield to maturity : Determine the approximate yield to maturity (use trial and error method, not financial calculator). Is it (Vail’s) a discount or premium bond? Why?
How workplace cultures affect human resource management : Explain how workplace cultures affect human resource management (HRM) competencies. Explain different leadership styles for the 21st century.
Carry extra capital as cushion against operational risks : The Bank for International Settlements has stated that banks should carry extra capital as a cushion against operational risks.
Cash investment required for the refinancing decision : Cash investment required for the refinancing decision. Annual cash benefits (savings) of the refinancing decision.
Calculate the cost of not taking cash discount : Calculate the cost of not taking a cash discount. What is the effective rate of interest on the bank loan?
What is the return-yield on your investment : You just sold a truck for $13,000. If six years ago you paid $9,000 for the used truck, what is the return (yield) on your investment?
What is the present value of your settlement : This sum will be paid out as $50,000 per year for each of the next ten years. what is the present value of your settlement?
Determine the amount of net operating income : Determine the amount of net operating income that would result of a hospital whose pay mix and expected volume (100 cases) is as follows:
Interest rate and quarterly compounding : Assuming a 6% interest rate and quarterly compounding, how much will a $5,000 investment be worth in nine years?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd