Unformatted text preview: takes discounts and it reduces A/P to $83.33 so it needs $416.67 cash and borrows $641.03. 0 1 | | 641.03 -641.03 -96.15 Discount interest +128.21-128.21 Compensating balance -512.82 416.67 With a financial calculator, input the following data, N = 1, PV = 416.67, PMT = 0, FV = -512.82, and then solve for I = 23.08%. Because the cost of nonfree trade credit is less than the cost of the bank loan, Malone should forge discounts and reduce its payables only to $250,000....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08