Bill Norman comes to you for advice. He just purchased a large amount of inventory with the terms 2/10, n/30. The amount of the invoice is $310,000. He is currently short of cash nut has a decent credit. He can borrow te money from needed to settle the account payable at an annual interest rate of 7 %. Bill is sure he will have the necessary cash by the due date of the invoice but not by the last day of the discount period. a. Convert the dscount rate into an annual interest rate (Use 365 days a year. Do not round intermediate calculations. Round you answer to 2 decimal places.). b. Make a recommendation regarding whether Bill should borrow the money and pay off the account payable within the discount period.
Bill Norman comes to you for advice. He just purchased a large amount of inventory with the terms 2/10, n/30. The amount of the invoice is $310,000. He is currently short of cash nut has a decent credit. He can borrow te money from needed to settle the account payable at an annual interest rate of 7 %. Bill is sure he will have the necessary cash by the due date of the invoice but not by the last day of the discount period.
a. Convert the dscount rate into an annual interest rate (Use 365 days a year. Do not round intermediate calculations. Round you answer to 2 decimal places.).
b. Make a recommendation regarding whether Bill should borrow the money and pay off the account payable within the discount period.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps