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&aring;‰&macr;&aelig;œ&not;Exercise 6-9

# &aring;‰&macr;&aelig;œ&not;Exercise 6-9...

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Exercise 6-9 This is the first of nine tabs in this file. These tabs contain information to explain how to compare the 1% credit term discount to the 16% bank loan to determine which is more favorable. The solution is done three ways. You need to master one of the three ways. Method 1: Total cost (2 tabs) Method 2: Compare annual interest rates (1 tab) Method 3: Compare 20 days' interest (3 tabs) Introduction to the text book exercise Inventory purchased from John's Fisheries: \$1,000 Credit terms : 2/10, n/30 Bank interest rate: 16% Is it cheaper to pay John's Fisheries \$1,000 on the due date or to borrow money from the bank and pay John's Fisheries within the discount period?

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Overview Legend for time line codes: ID: Invoice date LD: Loan date FP: Final payment (pay invoice amount to John's Fisheries or pay bank if money was borrowed) ID LD FP 0 10 30 days The terms of 1/10, n/30 mean 1% discount will be applied if the Korean restaurant pays John's Fisheries within 10 days of the invoice. In order to pay within the discount period, the restaurant must borrow cash from the bank.
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