Joanne Germano works in an account payable department solve this accounting questions Cash Discount vs LoanJoanne Germano works in an accounts payable department of a majorretailer. She has attempted to convince her boss to take the discounton the 3/15 net 90 credit terms most suppliers offer, but her bossargues that giving up the 3% discount is less costly than a short-termloan at 7%. Prove to whoever is wrong that the other is correct. (Note:Assume a 365-day year.)The cost of giving up the cash discount isdecimal places)%. (round to two

Step 1: Define Cash Discount vs Trade CreditA cash payment discount that requires early payment…

Answered: Cash Discount vs Loan Joanne Germano…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 32P

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A firm is offered credit terms of 2/10 net 45 by most of its suppliers. The firm also has a credit line available at a local bank at an interest rate of 12 percent. What is the cost of giving up the cash discount? Should the company take the cash discount or finance the purchase with the line of credit?
1) Ecobank uses a credit-scoring system to evaluate most consumer loans that amount to more than C40000. The key factors used in its scoring system are shown in the table below. The Badu family has two wage earners who have held their present jobs for 20 months. They have lived at their current street address for one year, where they rent on a five-month lease. Their credit report is excellent but shows only one previous charge. However, they are actively using two credit cards right now to help with household expenses. Yesterday, they opened an account at Ecobank and deposited C3000. Badu's have asked for a C50000 loan to purchase a used car and some furniture. The bank has a cut-off score in its scoring system of 30 points. Borrower's length of employment in his/her present job: More than one year Less than one year 3 points Borrower's length of time at current address: More than 2 years One to two years Less than one year Borrower's current home situation: 6 points Owns home Rents…
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1. For the best terms on a loan or credit card, you need a credit score above 700. To achieve this, start establishing credit now. Pay all of your bills on time. In addition, use only one-third of your available credit limit and pay off your revolving balance(s) each month. Abby has excellent credit. She wants to purchase a piece of equipment for her business and was offered 6% for 60 months for the $61,000 unit. What is her monthly payment by add-on method? (Round your answer to the nearest cent.) Monthly payment $
Assume the credit terms offered to your firm by your suppliers are 2/10, net 50. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 50. (Hint: Use a 365-day year.)The main reason that your firm has to pass on the discount and pay on the last allowed day (day 40), is lack of liquidity. The CFO is debating whether to borrow from a local bank, so that your firm has the cash sooner to take advantage of the trade credit. The best interest rate your firm can get from the local bank is 20% EAR. Should your firm borrow from the bank to take advantage of the trade credit? I got the correct answer to be 20.25% i need help on the steps to get this answer.
For the best terms on a loan or credit card, you need a credit score above 720. To achieve this, start establishing credit now. Pay all of your bills on time. In addition, use only one-third of your available credit limit and pay off your revolving balance(s) each month. R. J. Johnson has excellent credit. She wants to purchase a piece of equipment for her business and was offered 6% for 60 months for the $47,000 unit. What is her monthly payment by add-on method? Note: Round your answer to the nearest cent. Monthly payment
Some businesses called “car-title lenders” offer quick cash loans in exchange for holding the title to your car as collateral (you lose your car if you fail to pay off the loan). In many states, these lenders operate under pawnbroker laws that allow them to charge a fee that is a percentage of the unpaid balance. Suppose you need $2000 in cash, and a car-title lender offers you a loan at an interest rate of 2% per month plus a monthly fee of 20% of the unpaid balance. How much will you owe in interest and fees on your $2000 loan at the end of the first month? Suppose that you pay only the interest and fees each month. How much will you pay over the course of a full year? Suppose that you instead obtain a loan of $2000 from a bank with a term of 3 years and an APR of 10%. What are your monthly payments in that case? Compare these to the payments to the car-title lender.
As a jewelry store manager, you want to offer credit, with interest on outstanding balances paid monthly. To carry receivables, you must borrow funds from your bank at a nominal 5%, monthly compounding. To offset your overhead, you want to charge your customers an EAR (or EFF%) that is 1% more than the bank is charging you. What APR rate should you charge your customers? Do not round Intermediate calculations. Round your answer to two decimal places. %
A credit card company is studying its late fee policy. The company has two types of customers: revolvers and transactors. It has 30% revolvers and 70% transactors. The 21. balance carried by each type of customer is shown below: Balance, $ 2000 4000 6000 Revolver probability 0.2 0.3 0.5 Transactor probability 0.5 0.4 0.1 When late fees are assessed, customers call and request a reversal. The policy is to allow revolvers to get a refund of the fees, and to deny refunds to transactors. When denied refunds, 30% of accounts close their accounts within a year, while 20% of the others whose fees were returned also close their accounts (perhaps they are still unhappy). If you start with 20 accounts (all of whom are assessed late fees), simulate the total balance at the end of the year.

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