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What is MSI after-tax cost holding a unit of inventory

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Q1. Gillsons Inc. (GI) has just made a sale for $2,000,000. The company has decided to change its credit terms for this new customer to be 2/10 net 35 instead of paying in full in 35 days. The bank charges 5% on GI's line of credit. What is the net cost to the firm if the customer pays within the discount period?

a) $33,096

b) $40,000

c) $42,865

d) $46,904

Q2. It costs Miller Sons Inc. (MSI) $18 to purchase one unit of inventory and the storage and insurance costs for its inventory are $12.30 per unit for the period held. On average, MSI holds a unit of inventory for four months before it is sold. MSI's cost of capital is 10% and its tax rate is 25%. What is MSI's after-tax cost holding a unit of inventory?

a) $8.79

b) $9.23

c) $9.62

d) $9.66

Reference no: EM132614044

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