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8 Brampton Truck Parts needs $652,000 to take a cash discount of 2.50/10, net 70. A banker will loan the money for 60 days at an interest cost of $14,100. a. What is the annual rate on the bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate % b. How much would it cost (in percentage terms) if Brampton did not take the cash discount and paid the bill in 70 days instead of 10 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount c. Should Burt's borrow the money to take the discount? Yes %

8 Brampton Truck Parts needs $652,000 to take a cash discount of 2.50/10, net 70. A banker will loan the money for 60 days at an interest cost of $14,100. a. What is the annual rate on the bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate % b. How much would it cost (in percentage terms) if Brampton did not take the cash discount and paid the bill in 70 days instead of 10 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount c. Should Burt's borrow the money to take the discount? Yes %

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter22: Providing And Obtaining Credit
Section: Chapter Questions
Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...
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8 Brampton Truck Parts needs $652,000 to take a cash discount of 2.50/10, net 70. A banker will loan the money for 60 days at an interest cost of $14,100. a. What is the annual rate on the bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate b. How much would it cost (in percentage terms) if Brampton did not take the cash discount and paid the bill in 70 days instead of 10 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount c. Should Burt's borrow the money to take the discount? Yes No % d. If the banker requires a 10 percent compensating balance, how much must Burt's borrow to end up with the $652,000? (Round the final answer to the nearest whole dollar.) Amount to be borrowed $ Annual rate % e-1. What would be the interest rate in part d if the interest charge for 60 days were $25,000? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) % e-2. Should Brampton borrow with the 10 percent compensating balance? (There are no funds to count against the compensating balance requirement.)
Transcribed Image Text:8 Brampton Truck Parts needs $652,000 to take a cash discount of 2.50/10, net 70. A banker will loan the money for 60 days at an interest cost of $14,100. a. What is the annual rate on the bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate b. How much would it cost (in percentage terms) if Brampton did not take the cash discount and paid the bill in 70 days instead of 10 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of not taking a cash discount c. Should Burt's borrow the money to take the discount? Yes No % d. If the banker requires a 10 percent compensating balance, how much must Burt's borrow to end up with the $652,000? (Round the final answer to the nearest whole dollar.) Amount to be borrowed $ Annual rate % e-1. What would be the interest rate in part d if the interest charge for 60 days were $25,000? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) % e-2. Should Brampton borrow with the 10 percent compensating balance? (There are no funds to count against the compensating balance requirement.)
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