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What is the cost of failing to take the discount

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Reference no: EM132818347

Sonders Inc needs $50,000 to take a trade discount of 1/15 net 30. Sonders can borrow the funds from Bank A for 15 days at a cost of $400 or issue commercial paper at 99.25

REQUIRED:

a) What is the cost of failing to take the discount?

b) What is the annual interest rate on each of the bank loans?

c) What is the cost of issuing commercial paper?

d) What should Sonders do? (select one of the following):

  • forgo the trade discount and pay at net 30 days
  • take trade discount with loan from Bank A
  • take trade discount by issuing commercial paper

Reference no: EM132818347

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