Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 40, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require aditional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % lations Round vour answe

Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 40, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require aditional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % lations Round vour answe

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Description: Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 40, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume365 days in year for your c

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 26P

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Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent.$ What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % If the company could get the funds from a bank at a rate of 10%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your…
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 40, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. %24 What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % If the company could get the funds from a bank at a rate of 9%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your…
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 50, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. 2$ What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % If the company could get the funds from a bank at a rate of 9%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answ…
Quantitative Problem: Adams Manufacturing Inc. buys $9.1 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo discounts, how much additional credit could it obtain? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to the nearest cent.$ What would be the nominal and effective cost of such a credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.Nominal cost: %Effective cost: % If the company could receive the funds from a bank at a rate of 9%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places. % Should Adams use bank debt or additional trade credit?
NATO Co.’s business is booming, and it needs to raise more capital. The company purchases supplies from a single supplier on terms of 1/10, net 20 days, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and NATO’s owner believes she could delay payment to 30 days without adverse effects. What is the effective annual rate of stretching the accounts payable?
The D.J. Masson Corporation needs to raise $500,000 for 1 year to supplyworking capital to a new store. Masson buys from its suppliers on termsof 3/10, net 90, and it currently pays on the 10th day and takes discounts.However, it could forgo the discounts, pay on the 90th day, and therebyobtain the needed $500,000 in the form of costly trade credit. What is theeffective annual interest rate of this trade credit?
Your storage firm has been offered $95,400 in one year to store some goods for one year. Assume your costs are $96,700, payable immediately, and the cost of capital is 8.4%. Should you take the contract? The NPV Will Be $______ (Round to the nearest cent)
A firm can lease a truck for 5 years at a cost of $39,000 annually. It can instead buy a truck at a cost of $89,000, with annual maintenance expenses of $19,000. The truck will be sold at the end of 5 years for $29,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost $ 20,317.57 b. Which is the better option? O Buy Lease
A firm can lease a truck for 4 years at a cost of $35,000 annually. It can instead buy a truck at a cost of $85,000, with annual maintenance expenses of $15,000. The truck will be sold at the end of 4 years for $25,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost b. Which is the better option? Lease O Buy
A firm can lease a truck for 5 years at a cost of $49,000 annually. It can instead buy a truck at a cost of $99,000, with annual maintenance expenses of $29,000. The truck will be sold at the end of 5 years for $39,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Equivalent annual cost S 35,501.30x b. Which is the better option? Buy Lease
Holt Holdings, Inc., is considering replacing their existing operating system with a new one. The new system will save the company $70,000 per year for the next 8 years. Using a discount rate of 8%, what is the most the company should be willing to pay for the new system? $434,685.57 $692,822.75 $140,000.00 $560,000.00 $386,427.59
Anderson Manufacturing Co., a small fabricatorof plastics, needs to purchase an extrusion moldingmachine for $150,000. Anderson will borrow moneyfrom a bank at an interest rate of 7% over five years.Anderson expects its product sales to be slow duringthe first year, but to increase subsequently at an annualrate of 10%. Anderson therefore arranges with the bankto pay off the loan on a “balloon scale,” which resultsin the lowest payment at the end of the first year andeach subsequent payment being just 10% higher overthe previous one. Determine the five annual payments.