Please provide answer in text (Without image) 14.Garcia Company hasnual credit sales-$10 million Average collection period=60 days.Terms: Net 30. Interest rate=10%. The Garcia company proposes to offer discount policy of2/10, net 30. There will be 50% of its customers will take advantage of this new policy.As a result, the collection period will be reduced to 30 days.Should the Garcia Company offer the new credit terms?

Companies give discounts to customers so that customers pay early to avoid possible losses on debt…

ompany hasnual credit sales-$10 million Average collection period-60 days t 30. Interest rate=10%. The Garcia company proposes to offer discount po t 30. There will be 50% of its customers will take advantage of this new ult, the collection period will be reduced to 30 days. he Garcia Company offer the new credit terms?

ompany hasnual credit sales-$10 million Average collection period-60 days t 30. Interest rate=10%. The Garcia company proposes to offer discount po t 30. There will be 50% of its customers will take advantage of this new ult, the collection period will be reduced to 30 days. he Garcia Company offer the new credit terms?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter16: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 8P

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Your company is considering three options for financing its short term operations Borrow Tk.20 million from Shuktara Bank at 12 percent interest rate and a 15 percent compensating balance requirement signing a 60 day promissory note. Borrow Tk.20 million from Chandramukhi Bank at 12 percent discount interest. Forego discount on a trade credit on terms 2/15, net 45. Strictly based on effective cost, which option would you select and why?
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. What is the effective annual cost of not taking this discount? (Assume a 365-day year.) * O 45.50% 44.30% O 37.39% 30.00% 32.25%
Your company is considering three options for financing its short term operations i. Borrow Tk.25 million from Shuktara Bank at 15 percent interest rate and a 20 percent compensating balance requirement signing a 60 day promissory note. ii. Borrow Tk.25 million from Chandramukhi Bank at 15 percent discount interest. i. Forego discount on a trade credit on terms 3/10, net 50. Strictly based on effective cost, which option would you select and why?
7. A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. What is the effective annual cost of not taking this discount? (Assume a 365-day year.) A. 30.00% B. 32.25% C. 37.39% E. 45.50% D. 44.30% 8. AMA Computers needs to borrow $800,000 from the Midland Bank. The bank requires a 15% compensating balance. How much money will Analog need to borrow in order to end up with P800,000 spendable cash? A. P920,000 C. P1,058,264 D. none of these B. P941,177 9. DMT Farms harvests crops in roughly 90-day cycles based on a 360-day year. The firm receives payment from its harvests sometime after shipment. Due in part to the firm's rapid growth, it has been borrowing to finance its harvests using 90-day bank notes on which the firm pays 12% discount interest. If the firm requires P60,000 in proceeds from each note, what must be the face value of each note? A. P60,000 C. P67,423 E. P68,182 Finals Quiz 2- AE 122 (W. B. P61,856 D.…
1.A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. Questions: - What is the annual nominal rate of not taking this discount? - How much is the rate per period?
A company can issue a 90-day $5 million commercial paper at a rate of 6.55%. It can reduce the rate to 6.35% if it is backed by a standby letter of credit (SBLC). A bank is willing to issue the SBLC for a fee of 10 basis points. a) Should the company obtain an SBLC? Explain why or why not? b) Explain the formula - Expected loss = EAD × PD × LGD
Q3) Discount Sales = $24m Credit Terms = 2/10, net/30 Borrowing rate = 17% 30% customers will avail discount and 70% will not avail. Is this a viable proposition?
5. If this loan had been made on a 10% add-on basis payable in 12 end-of-month installments, that would be the monthly payments? What is the annual percentage rate? The effective annual rate? ($45,833.33, 17.97%, 19.53%) E • How does the cost of costly trade credit generally compare with the cost of shortterm bank loans? L Focus F9 F10 F11 F12 8 9
f a firm buys under terms of 3/15, net 50, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places. % Does it receive more or less credit than it would if it paid within 15 days? I. Paying after the discount period, but still taking the discount gives the firm less credit than it would receive if it paid within 15 days. II. Paying before the discount period and taking the discount gives the firm more credit than it would receive if it paid within 15 days. III. Paying after the discount period, but still taking the discount gives the firm more credit than it would receive if it paid within 15 days.
B. Kings Company presents the following information: 1. Annual credit sales: P 25,200,000 2. Collection period: 3 months 3. Rate of return: 12% Kings company considers changing its credit term from n/30 to 3/10, 1/30. The following are expected to result: (1) 30% of its customers will take advantage of the discount; (2) sales will remain constant; and (3) the collection period is expected to decrease to two months Should the company implement the proposed discount policy? Why?
16. A store offers two payment plans. Under the instalment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price. a. If you can borrow or lend funds at a 6% interest rate, which is the better deal? b. If the payments on the 4-year instalment plan do not start for a full year, which plan is a better deal?
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year) a. What is the effective annual cost of not taking this discount? b. How many days are there per period? c. How much is the rate per period? d. The number of compounding period is_? e. What is the annual nominal rate of not taking this discount?