3). Simple Simon's Bakery purchases supplies on terms of 1.2/10, net 25. If Simple Simon's chooses to take t discount offered, it must obtain a bank
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# help and explanation answering class="ql-cursor">﻿ ATTACHMENT PREVIEW Download attachment A49A9B72-87A0-4152-BD80-61C973918D4C.jpeg 3). Simple Simon's Bakery purchases supplies on terms of 1.2/10, net 25. If Simple Simon's chooses to take t discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quo Simple Simon's owner an interest rate of 10.9% on borrowed funds. a. What is the effective annual cost of trade credit if Simple Simon choose to forgo the discount and pay day 25? (Hint: Use 365 days for a year). b. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount?

a). Effective Cost = [1 + {Discount% / (1 - Discount%)}] [365 / (Normal days - Discount days)] - 1 = [1 + {0.012 /... View the full answer

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