On average, how much “free” trade credit does the firm receive during the year?

Q: Wrexham Corp. (WC) purchases computer parts from its suppliers 1/15, net 30. However, to take…

A: Effective cost is the total cost of borrowing, not just the interest charges. When you borrow…

Q: Kumi Ltd permits its customers to pay with a credit card or to receive a percentage discount ? for…

A: Given:

Q: GFB Co. buys on terms of 2/15, net 30 days. It does not take discounts, and it typically pays 30…

A: Free Trade credit refers to a type of financing wherein the buyer gets a credit period of…

Q: TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the…

A: Step 1: The quarterly interest rate We are given that the annual interest rate (i(52)) is 12.500%.…

Q: a. What effective annual interest rate does the firm earn when a customer does not take the…

A: Companies give discount to the customers for early payment and that is cost to the company and that…

Q: McDowell Industries sells on terms of 4/10, net 40. Total sales for the year are $825,500. Thirty…

A: Discounted customers=15×30%=4.5 days

Q: Yoo Incorporated, has arranged a line of credit that allows it to borrow up to $63 million at any…

A: We need to use compound interest formula below to calculate interest Compound interest = P[(1+i)n…

Q: ection period. BECK does not offer discounts for early payment; thus, customers take the full 30…

A: Basic concept of cash discount and receivable collection period

Q: ompany hasnual credit sales-$10 million Average collection period-60 days t 30. Interest rate=10%.…

A: Companies give discounts to customers so that customers pay early to avoid possible losses on debt…

Q: c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use…

A: Given, Invoice amount=$ 1,500 1/15, net 60, basis which means if company y pays within 15 days then…

Q: Yoo, Incorporated, has arranged a line of credit that allows it to borrow up to $42 million at any…

A: Interest paid refers to an amount that is paid by the borrower to the lender on the loan amount at…

Q: Han Corp's sales last year were $300,000, and its year-end receivables were $49,000. The firm sells…

A: The objective of the question is to find out the average number of days late that customers pay…

Q: lender engages in a 15-day $1,000,000 reverse repo at a rate of 2.50%. The haircut is 2%. The…

A: In a reverse repo, the borrower will have to will give the collateral to lender and the lender will…

Q: Mavericks Cosmetics buys $3,305,717 of product (net of discounts) on terms of 5/10, net 60, and it…

A: Effective percentage cost of trade credit considers the compounding effect.Following is the formula…

Q: Assume the credit terms offered to your firm by your suppliers are 2/15, net 30 . Calculate the cost…

A: Discount % = 2% Credit Period = 30 daysDiscount Period = 15 daysNumber of day in a year = 365

Q: A store will give a 2.5% disount on the cost of purchase if you pay cash today. The payment is due…

A: Effective annual rate (EAR) is a measure of the true annual interest rate that takes into account…

Q: Illustration: A company sells $50,000 of goods with the terms net/30. The receivable is immediately…

A: Sales price = $50,000 Factor fee = 3% Interest = 10% reserve = 8%

Q: 7. The CFO has negotiated a cheaper deal with mCommerceBank, a competitior of eCommerceBanque. The…

A: When we take a loan we have to make periodic payments towards servicing that loan. The payments can…

Q: 23 (Exam Question EC1.) What is the implied interest rate for the customer on an annual basis? Your…

A: The problem is asking us to calculate the implied interest rate for the customer on an annual basis.…

Q: 5. MTR bank has agreed to provide a lockbox system to Sexy Inc. for a fixed fee of P50, 000 per year…

A: Given, Fixed fee = P 50,000

Q: Aggarwal Inc. buys on terms of 2/15, net 45, and it always pays on the 45th day. The CFO calculates…

A: We know that:The average amount of costly trade credit carried by the firm is $275,000.The firm pays…

Q: AL Enterprises purchases P4,562,500 in goods per year from its sole supplier on terms of 2/15, net…

A: Discount rate = 0.02 (i.e. 2%) Allowed payment days = 50 Discount days = 15

Q: Newsome Inc. buys on terms of 4/10, net 45. It does not take the discount, and it generally pays…

A: Effective annual percentage = (1+[Discount rate/(1–Discount Rate)])^n– 1 Where n= No. of days in a…

Q: Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 5/10,…

A: Trade credit is a type of credit that is extended by a business to its customers. It allows…

Q: A wholesale company needs to borrow $600,000 to finance inventory for the upcoming seasonal rush.…

A: A borrower gets an interest quote for a borrowing, however it needs to maintain a compensating…

Q: Ex/ A company sells $10,000 in merchandise to a buyer on finance.Another financial institution has…

A: FV is the $10,000 in merchandise the company sold,r is the discount rate of 4% per year (0.04 as a…

Q: Aggarwal Inc. buys on terms of 2/10, net 30, and it always pays on the 30th day. The CFO calculates…

A: Costly trade credit = Purchases per day*(days credit outstanding- discount period)$350,000 =…

Q: Quantitative Problem: Adams Manufacturing Inc. buys $11 million of materials (net of discounts) on…

A: 1) 2/10 net 50 means the company gets a 2% discount if they pay within 10 days, otherwise the whole…

Q: 4. Estrada V. Escritor sells on terms 3/10, net 30. Total sales for the year are ₱2,539,130.  Forty…

A: Accounts receivables are those customer accounts to whom business has made credit sales on account…

Q: If a firm buys under terms of 3/15, net 30, but actually pays on the 20th day and still takes the…

A: Companies gives discount to the customers for early payments to customers but that is cost to…

Q: If a firm buys under terms of 1/15, net 40, but actually pays on the 20th day and still takes the…

A: 1/15, net 40 means that the supplier will give an additional discount of 1% to the buyer if the…