Cost of trade credit and bank loan

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Reference no: EM13951492

Cost of Trade Credit and Bank Loan -

Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30; and it currently pays after 5 days and takes discounts. Lamar plans to expand, which will require additional financing. Assume 365 days in year for your calculations.

I found that the additional credit they will receive if they take the discount to be 547945.2, How do I find the nominal cost of the credit and the effective cost of credit?

Reference no: EM13951492

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Cost of trade credit and bank loan : Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30; and it currently pays after 5 days and takes discounts. Lamar plans to expand, which will require additional financing. Assume 365 days in year for your calculation..

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