What are the nominal and effective costs of trade credit

Assignment Help Financial Management

Reference no: EM131049022

Grunewald Industries sells on terms of 3/10, net 40. Gross sales last year were $4,181,000, and accounts receivable averaged $423,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate sales/day based on a 365-day year; then get average receivables of discount customers; then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places.

Reference no: EM131049022

Questions Cloud

Bonds value would the most affected if interest rates rose : Assume that you bought 5-ycar,, 15-year, and 25-year bonds, all with a 10 percent coupon rnte and semiannual coupons, at their $1,000 par values. Which bond's value would the most affected if interest rates rose to 13 percent? Which would ho least af..

About the free cash flow : Free Cash Flow Tater and Pepper Corp. reported free cash flows for 2015 of $39.1 million and investment in operating capital of $22.1 million. Tater and Pepper incurred $13.6 million in depreciation expense and paid $28.9 million in taxes on EBIT in ..

Discuss the various systems development methodologies : Discuss the various systems development methodologies. Can developers use a hybrid of the technologies in developing systems.

Dividend yield-what is the expected capital gains yield : The next dividend payment by Halestorm, Inc., will be $1.64 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. The stock currently sells for $31 per share. What is the dividend yield? What is the expected capital..

What are the nominal and effective costs of trade credit : Grunewald Industries sells on terms of 3/10, net 40. Gross sales last year were $4,181,000, and accounts receivable averaged $423,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of ..

The value of the peso could reduce your dollar cash flows : You are already aware that a decline in the value of the peso could reduce your dollar cash flows. Yet, according to purchasing power parity, a weak peso should only occur in response to a high level of Mexican inflation, and such high inflation shou..

Create a dialogue between you and a travel agent : Create a dialogue between you and a travel agent - Draw or insert a picture of your favorite dinner and beverage and describe that meal in good French.

About the forward rate as forecast of the future spot rate : Mexican interest rates are normally substantially higher than U.S. interest rates. What does this imply about the forward rate as a forecast of the future spot rate? Does the forward rate reflect a forecast of appreciation or depreciation of the Mexi..

Imply about the inflation differential : Mexican interest rates are normally substantially higher than U.S. interest rates. What does this imply about the inflation differential (Mexico inflation minus U.S. inflation), assuming that the peso interest rate is the same in both countries? Doe..

User Account

All Pages