PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 30, Problem 12PS
a)
Summary Introduction
To determine: The amount of discount.
b)
Summary Introduction
To determine: Effective annual
c)
Summary Introduction
To discuss: Payment terms based on given situations.
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Students have asked these similar questions
Company X sells on a 2/15, net 60, basis. Company Y buys goods with an invoice of $4,500.
a. How much can company Y deduct from the bill if it pays on day 15? (Do not round intermediate calculations.)
b. How many extra days of credit can company Y receive if it passes up the cash discount?
c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Company X sells on a 2/10, net 90, basis. Company Y buys goods with an invoice of $1,500.
a. How much can company Y deduct from the bill if it pays on day 10?
Note: Do not round intermediate calculations.
b. How many extra days of credit can company Y receive if it passes up the cash discount?
c. What is the effective annual rate of interest if Y pays on the due date rather than day 10?
Note: Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places.
a. Discount
b. Number of days
c. Effective annual rate
$
75
80 days
%
Need help with C only
Company X sells on a 1/15, net 60, basis. Company Y buys goods with an invoice of $1,500.
a. How much can company Y deduct from the bill if it pays on day 15? (Do not round intermediate calculations.)
$15
b. How many extra days of credit can company Y receive if it passes up the cash discount?
45 days
c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
???
Chapter 30 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 30 - Prob. 1PSCh. 30 - Components of working capital True or false? a....Ch. 30 - Inventory True or false? a. Just-in-time inventory...Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 5PSCh. 30 - Prob. 6PSCh. 30 - Prob. 7PSCh. 30 - Prob. 8PSCh. 30 - Prob. 9PSCh. 30 - Credit terms Phoenix Lambert currently sells its...
Ch. 30 - Prob. 11PSCh. 30 - Prob. 12PSCh. 30 - Prob. 13PSCh. 30 - Prob. 14PSCh. 30 - Prob. 15PSCh. 30 - Credit policy How should your willingness to grant...Ch. 30 - Prob. 17PSCh. 30 - Prob. 18PSCh. 30 - Prob. 19PSCh. 30 - Prob. 20PSCh. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 22PSCh. 30 - Prob. 23PSCh. 30 - Prob. 24PSCh. 30 - Prob. 25PSCh. 30 - Prob. 26PSCh. 30 - Prob. 27PSCh. 30 - Prob. 28PSCh. 30 - Prob. 29PSCh. 30 - Prob. 30PSCh. 30 - Prob. 31PSCh. 30 - Prob. 32PSCh. 30 - Prob. 34PSCh. 30 - Prob. 35PSCh. 30 - Prob. 36PSCh. 30 - After-tax yields Suppose you are a wealthy...Ch. 30 - Prob. 38PSCh. 30 - Prob. 39PS
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- Hillz sells its goods with terms of 1/16 EOM, net 30. What is the implicit cost of the trade credit? (Do not round intermediate calculations. Use 365 days for calculation. Round answer to 2 decimal places, e.g. 12.25%.)arrow_forwardHelp me with the solution: Jacob Co. sells merchandise on credit to Isaiah Co. in the amount of $9,700. The invoice is dated on May 1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?arrow_forwardWhich of the following mathematical equations is used to compute the payables deferral period (DPO)? 000 о Payables deferral period (DPO) = Accounts payable/Daily credit purchases Payables deferral period (DPO) = Cost of goods sold/Accounts payables Payables deferral period (DPO) = Daily credit purchases/Accounts payable Payables deferral period (DPO) = Payables turnover 360 Payables deferral period (DPO) = Payables turnover/360arrow_forward
- Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale for the buyer as well as the seller. Consider this case: Free Spirit Industries Inc. buys on terms of 1/20, net 45 from its chief supplier. If Free Spirit receives an invoice for $1,254.98, what would be the true price of this invoice? (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) O $1,304.55 $1,056.07 $1,242.43 O $1,118.19 The nominal annual cost of the trade credit extended by the supplier is , assuming a 365-day year. (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) Suppose Free Spirit does not take advantage of the discount and then chooses to pay its supplier late-so that on average, Free Spirit will pay its by paying late. (Note: supplier on the 50th day after the sale. As a result, Free Spirit can…arrow_forwardThe credit terms offered to a customer by a Merchandise Business are 2/10, n/30, which means that a. The customer can deduct a 2% discount if the bill is paid within 30 days of the invoice date. The customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date. c. The customer must pay the bill within 10 days. d. The customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.arrow_forwardCompany X has trade credit policy 1/10 N45. If you can borrow from a bank at 9,5% annual rate, would it be beneficial to borrow money and pay off invoices earlier?arrow_forward
- You receive an invoice for $18,300 with terms of 5/15, n/60. If the supplier has a policy of allowing a cash discount for partial payments and you pay $11,500 within the discount period, calculate the amount of credit you will receive for this payment. a) $12,105.26 b) $12,105.0 c) $12.105arrow_forwardFirms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale for the buyer as well as the seller. Consider this case: Tasty Tuna Corporation buys on terms of 4/10, net 45 from its chief supplier. A. If Tasty Tuna receives an invoice for $856.75, what would be the true price of this invoice? (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) $822.48 $575.74 $699.11 $616.86 B. The nominal annual cost of the trade credit extended by the supplier is , assuming a 365-day year. (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) C. Suppose Tasty Tuna does not take advantage of the discount and then chooses to pay its supplier late—so that on average, Tasty Tuna will pay its supplier on the 50th day after the sale. As a result,…arrow_forwardFirms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale for the buyer as well as the seller. Consider this case: Tasty Tuna Corporation buys on terms of 1/20, net 60 from its chief supplier. If Tasty Tuna receives an invoice for $1,254.98, what would be the true price of this invoice? (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) $1,553.04 $1,242.43 $1,056.07 O $931.82 The nominal annual cost of the trade credit extended by the supplier is calculations to four decimal places, and your final answer to two decimal places.) , assuming a 365-day year. (Note: Round all intermediate Suppose Tasty Tuna does not take advantage of the discount and then chooses to pay its supplier late-so that on average, Tasty Tuna will pay its supplier on the 65th day after the sale. As a result, Tasty Tuna can decrease its nominal cost of trade…arrow_forward
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