Different prices and different payment windows for same part

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Reference no: EM132285644

The two suppliers in question offer different prices and different payment windows for the same part. We need to put the two options into the same terms by performing a price analysis.

Supplier A: $100/unit, payment due in 90 days

Supplier B: $105.50/unit, payment due in 30 days

Number of days earlier Supplier A must be paid than Supplier B (longest days to pay – shortest days to pay)

Number of days earlier Supplier A must be paid than Supplier B =

Daily cost of capital assuming a 20% annual cost of capital.

Cost of Capital/days in a year =

Opportunity cost = # of days * daily cost of capital * purchase price of A

Opportunity cost =

Effective price for Supplier A (in like terms as B)

Supplier A cost + opportunity cost =

Describe the result?

Reference no: EM132285644

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