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Determine the amount mm-m should pay

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Question - Montez Muffins and More (MM&M) is a bakery located in New York City. MM&M purchases a great deal of flour in bulk from a wholesaler. The wholesaler offers purchase discounts for fast payment. MM&M purchased 600 pounds of flour for $0.20 per pound on May 1, under terms 2/10, n/30. Determine the amount MM&M should pay under the following scenarios.

1. MM&M makes payment on May 25.

2. MM&M makes payment on May 7.

3. MM&M pays half of the balance on May 7 and half on May 18.

4. What is the discount percentage being offered to MM&M?

5. What is the inherent annual interest rate earned by MM&M by paying within the discount period?

6. If a company does not have sufficient cash flow to take advantage of the discount period, is it beneficial to make a partial payment within the discount period?

Reference no: EM133131358

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