Question

Neveready Flashlights Inc. needs $490,000 to take a cash discount of 2/10, net 60. A banker will loan the money for 50 days at an interest cost of $7,400. 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) ir the firm did not take the cash discount, but paid the bill in 60 days instead of 10 days? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places ces Cost of not taking a cash discount C. Should the firm borrow the money to take the discount? Yes ONo d. If the banker requires a 12 percent compensating balance, how much must the firm borrow to end up with the $490,000? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Amount to be borrowed $ e-1. What would be the effective interest rate in part dif the interest charge for 50 days were $10,400? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Annual rate %

Answer 1

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