View the step-by-step solution to:

Question

please answer this question !Q1.png

Q1.png

1. You are currently re-evaluating your payables policy. Your current supplier ofl'ers terms of 1.510, net 40 with a late payment fee of 1.5% per month. A supplier wanting your business is willing to olfer terms of 2.515, net 60 with no stated late payment fee. Your annual borrowing rate is 18%. Assume a 365-day year. a. How long should you delay payment given the terms of your current supplier?
Prove your answer by relating the annualized cost of the discount to your
investment or borrowing rate. b. How long should you delay payment given the terms of the competing supplier?
Prove your answer by relating the annualized cost of the discount to your
investment or borrowing rate. c. Based on an average invoice of $100,000, which supplier should you purchase
fi'orn, i.e., which set of terms results in the minimum net present-value cost?

Top Answer

A) With the current supplier the payment should be delayed to 40 days and... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question