Deja owns a photo printing business and wants to purchase a new state-of-the-art photo printer that she found online for $9,275, plus sales tax of 5.5%. The supply company is offering cash terms of 2/15, n/30, with a 1.5% service charge on late payments, or 90 days same as cash financing if Deja is approved for a company line of credit. If she is unable to pay within 90 days under the second option, she would have to pay 22.9% annual simple interest for the first 90 days, plus 2% simple interest per month on the unpaid balance after 90 days. Deja has an excellent credit rating but is unsure of what to do.   d) Deja finds financing through a local bank. Find the bank discount and proceeds using ordinary interest for a 90-day promissory note for $9,500 at 8% annual simple interest. Is this enough money for Deja to cover the purchase price of the printer? Is this a better option for Deja to pursue, why or why not?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Deja owns a photo printing business and wants to purchase a new state-of-the-art photo printer that she found online for $9,275, plus sales tax of 5.5%. The supply company is offering cash terms of 2/15, n/30, with a 1.5% service charge on late payments, or 90 days same as cash financing if Deja is approved for a company line of credit. If she is unable to pay within 90 days under the second option, she would have to pay 22.9% annual simple interest for the first 90 days, plus 2% simple interest per month on the unpaid balance after 90 days. Deja has an excellent credit rating but is unsure of what to do.

 

d) Deja finds financing through a local bank. Find the bank discount and proceeds using ordinary interest for a 90-day promissory note for $9,500 at 8% annual simple interest. Is this enough money for Deja to cover the purchase price of the printer? Is this a better option for Deja to pursue, why or why not?

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