Document 1 - 1 A supplier is offering your firm a cash...

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1. A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days; otherwise the bills due at the end of sixty days. Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash
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Unformatted text preview: discount ofer? Explain your answer. Answer: Efective cost o± credit = 0.02/ (1 – 0.02) x 365/ (60 – 10) = 0.1490 = 14.90% No, because bank has higher interest rate than supplier....
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  • Spring '16
  • Flores
  • Interest Rate, Harshad number, Cash Discount, annual interest rate, discount offer

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