Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 21, Problem 15P

Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts.

  1. a. What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.)
  2. b. Is there a cost of the trade credit the firm uses?
  3. c. If the firm did not take discounts but did pay on the due date, what would be its average payables and the cost of this nonfree trade credit?
  4. d. What would be the firm’s cost of not taking discounts if it could stretch its payments to 40 days?
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Intermediate Financial Management (MindTap Course List)

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Intermediate Financial Management (MindTap Course...
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ISBN:9781337395083
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Publisher:Cengage Learning
Debits and credits explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=n-lCd3TZA8M;License: Standard Youtube License