Your firm needs to purchase 1,200 traffic cones from a supplier. One supplier demands a payment of $1,000.00 today plus $10.59 per cone payable in one year. Another supplier will ask for no payment today and $11.59 per cone, also payable in one year. If the discount rate is 8.200% per year compounded annually, how much does your firm save (in terms of today’s dollars) by taking the less expensive offer compared to the more expensive offer?

Your firm needs to purchase 1,200 traffic cones from a supplier. One supplier demands a payment of $1,000.00 today plus $10.59 per cone payable in one year. Another supplier will ask for no payment today and $11.59 per cone, also payable in one year. If the discount rate is 8.200% per year compounded annually, how much does your firm save (in terms of today’s dollars) by taking the less expensive offer compared to the more expensive offer?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter13: Other Financing Alternatives

Section: Chapter Questions

Problem 1bM

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