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What would be the interest rate

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Question - Assume that Guizhou Falls Department Store orders inventory and is offered a cash discount by one of their suppliers with the condition 2/10, net 40. In order for Guizhou Falls to take the cash discount, the company will need temporary financing of $75,000 for 30 days. The local bank offers a loan for 12% per annum (i.e. annual interest).

Required -

(a) What is the cost of foregoing the cash discount?

(b) If Guizhou Falls decides to take the bank loan, how much will they have to pay in interest?

(c) What amount would Guizhou Falls need to borrow, if there was a required 8% compensating balance?

(d) What would be the interest rate if the interest charge for the offered loan was $937 and if there was a required 8% compensating balance on the loan?

(e) Should Guizhou Falls borrow the required amount and realize the cash discount under the conditions in (b)? Only enter either Yes or No.

(f) Should Guizhou Falls borrow the required amount and realize the cash discount under conditions in (d)? Only enter either Yes or No.

Reference no: EM133078219

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