Answered: If the average invoice is $200,000, and…

If the average invoice is $200,000, and the company's cost of capital is 8%, would the company be better off if their customers take the discount or not?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 10MC

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Question

A company is currently offering terms of 1/10 net 45 to its customers. If the average invoice is $200,000, and the company's cost of capital is 8%, would the company be better off if their customers take the discount or not?

answer choices:

No. The seller is better off by $580 if the buyers pay on Day 45

Yes, because the seller is better off by about $580 if the buyers take the discount.

No. The seller is better off by $480 if the buyers pay on Day 45

Yes, because the seller is better off by about $480 if the buyers take the discount.

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