2. Problem 15.03 (Cost of Trade Credit and Bank Loan) eBook Problem Walk-Through Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 45, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. %24 What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % If the company could get the funds from a bank at a rate of 11%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places. % Should Lancaster use bank debt or additional trade credit? -Select

2. Problem 15.03 (Cost of Trade Credit and Bank Loan) eBook Problem Walk-Through Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 45, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. %24 What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % If the company could get the funds from a bank at a rate of 11%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places. % Should Lancaster use bank debt or additional trade credit? -Select

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Description: Please image to solve question. 2. Problem 15.03 (Cost of Trade Credit and Bank Loan)еВook目Problem Walk-ThroughLancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 45, and it currently pays on the 5th day and takes di

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter7: Credit Cards And Consumer Loans

Section: Chapter Questions

Problem 5DTM

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8 Brampton Truck Parts needs $652,000 to take a cash discount of 2.50/10, net 70. A banker will loan the money for 60 days at an interest cost of $14,100. a. What is the annual rate on the bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate b. How much would it cost (in percentage terms) if Brampton did not take the cash discount and paid the bill in 70 days instead of 10 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount c. Should Burt's borrow the money to take the discount? Yes No % d. If the banker requires a 10 percent compensating balance, how much must Burt's borrow to end up with the $652,000? (Round the final answer to the nearest whole dollar.) Amount to be borrowed $ Annual rate % e-1. What would be the interest rate in part d if the interest charge for 60 days were $25,000? (Use 365 days in a…
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