On february 5, 2018, nicanor merchandising has purchased goods on account amounting to 500,000 with credit terms of 3/15, n/60 from its major trade supplier. nicanor operates 360 days a year. Required: 3. assuming nicanor did not pay the account within the discount period, how much is the penalty in using the money for the next 45 days? (please answer) 4. in case the prevailing interest rate on bank loan is 20% per annum at simple interest, should nicanor pay within the discount period or not? Breifly discuss your answer and present supporting computation. (please answer) 5. determine the net monetary benefit that nicanor will enjoy in selecting the optimal alternative. (please anwer)

On february 5, 2018, nicanor merchandising has purchased goods on account amounting to 500,000 with credit terms of 3/15, n/60 from its major trade supplier. nicanor operates 360 days a year. Required: 3. assuming nicanor did not pay the account within the discount period, how much is the penalty in using the money for the next 45 days? (please answer) 4. in case the prevailing interest rate on bank loan is 20% per annum at simple interest, should nicanor pay within the discount period or not? Breifly discuss your answer and present supporting computation. (please answer) 5. determine the net monetary benefit that nicanor will enjoy in selecting the optimal alternative. (please anwer)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

Wrexham Corp. (WC) purchases computer parts from its suppliers 1/15, net 30. However, to take advantage of the discount WC needs to get a bank loan. The bank charges 8% interest (APR) and a one percent origination fee for the loan (assume the loan is for 1 year and is renewed yearly). What is the effective annual cost of not taking the trade discount? What is the effective cost of the bank loan? Should WC take out the bank loan to take advantage of the trade credit?
A person borrows $3,000 on a bank credit card at a nominalrate of 18% per year, which is actually charged at a rate of1.5% per month. a. What is the annual percentage rate (APR) for the card?(See Example 5.6.8 for a definition of APR.) b. Assume that the person does not place any additionalcharges on the card and pays the bank $150 eachmonth to pay off the loan. Let Bn be the balance owedon the card after n months. Find an explicit formulafor Bn . c. How long will be required to pay off the debt? d. What is the total amount of money the person will havepaid for the loan? If you could please answer b and d for me I put the other 2 questions there in cases they where somehow apart of b and d
13) A customer with unpaid balance for merchandise of $210.00 from the previous month has been paying $75.00 a month. Bank credit terms are 1% interest per month on all unpaid balances and a minium interest charge of 50 cents. If the customer makes no new purchases and maintains the montly payment of $75 a month, calculate the total amount of finance charge that he will pay. Finance charge: ?
Company X sells on a 2/15, net 60, basis. Company Y buys goods with an invoice of $4,500. a. How much can company Y deduct from the bill if it pays on day 15? (Do not round intermediate calculations.) b. How many extra days of credit can company Y receive if it passes up the cash discount? c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
A print shop borrows $2900 from a credit union for 231 days. The credit union charges simple interest at an annual rate of 8.25% for this loan. Assume each day is of a year. Answer each part below. 365 Do not round any intermediate computations, and round your final answers to the nearest cent. If necessary, refer to the list of financial formulas. (a) Find the interest that will be owed after 231 days. $0 (b) Assuming the print shop doesn't make any payments, find the amount owed after 231 days. ? 2 B 4
Simple Simon's Bakery purchases supplies on terms of 1.1/10, net 25. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.6% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use 365 days for a year.) The cost of forgoing the discount is %. (Round to one decimal place.) Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Select the best choice below.) A. Simple Simon's should enter into the loan agreement but not begin taking the discount. B. Need more information to answer the question. OC. Simple Simon's should enter into the loan agreement with the bank and begin taking the discount. D. Simple Simon's should not enter into the loan agreement but should begin taking the discount.
Simple Simon's Bakery purchases supplies on terms of 1.7/10, net 25. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.2% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use 365 days for a year.) The cost of forgoing the discount is %. (Round to one decimal place.) Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Select the best choice below.) A. Simple Simon's should enter into the loan agreement with the bank and begin taking the discount. B. Simple Simon's should not enter into the loan agreement but should begin taking the discount. C. Simple Simon's should enter into the loan agreement but not begin taking the discount. D. Need more information to answer the question.
JENNY Company has been granted credit terms of 2/10, net 30 by the supplier. JENNI operates 360 days a year.Required: 1. Compute the nominal annual cost of credit or the cost of forgoing the cash discount 2. If the prevailing nominal interest rate of commercial bank on loan is 10% per annum will it be favorable for JENNY not to pay within the discount period and use the money as the source of financing? Discuss your answer briefly. 3. Compute the effective annual rate of trader's credit.with solu
Slingshot Machine Tool Co. owes $40,000 to one of its suppliers. The supplier has offered a trade discount of 2/10 net 30. Slingshot can borrow the funds from either of two banks: First City Bank will loan the funds for 20 days at a cost of $400; Upstart Bank offers a discounted loan for 20 days at a cost of $320. -What is the cost of failing to take the discount? -What is the effective interest rate on each of the loans? -Should Slingshot take the cash discount?-Which bank loan should Slingshot use?
Yesterday, Smiley Company sold $22,500 of merchandise on credit. The invoice was sent today with the terms, 3/10 net 40. This customer normally pays on the net date. What is the effective rate of interest the customer is paying by not taking the discount? Assume a 365-day year.
A company buys on terms of 2/15, net 30 days. It does not take discounts, and it typically pays 35 days after the invoice date. Net purchases amount to P720,000 per year. What is the nominal annual cost of its non-free trade credit? (Assume a 365-day year.) Show your complete solution.
Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table: Customer Accounts Receivable Average age of account Average payment period of customer A $11,000 42 days 50 days B $25,000 70 days 65 days C $10,000 48 days 45 days D $28,000 55 days 50 days E $14,000 50 days 60 days F $19,000 21 days 35 days G $30,000 10 days 30 days H $16,000 25 days 40 days…