a. Annual rate = Discount rate x (365 days ÷ Discount term*)
Annual rate = 2% x (365 ÷ 15)
Annual rate = 48.67%
b. Since the annualized discount rate (48.67%) is significantly higher than the cost of borrowing (8%) Norman should borrow the money and payoff the liability within the discount period.
E3 Saved 7. Bill Norman comes to you for advice. He has just purchased a large...
Bill Norman comes to you for advice. He has just purchased a large amount of inventory with the terms 2/10, n/30. The amount of the invoice is $310,000. He is currently short of cash but has decent credit. He can borrow the money needed to settle the account payable at an annual interest rate of 7 percent. Bill is sure he will have the necessary cash by the due date of the invoice but not by the last day of...
Bill Norman comes to you for advice. He has just purchased a large amount of Inventory with the terms 3/20, 1/60. The amount of the Involce is $330,000. He is currently short of cash but has decent credit. He can borrow the money needed to settle the account payable at an annual Interest rate of 11 percent. Bill is sure he will have the necessary cash by the due date of the involce but not by the last day of...
Return to question 13 Bill Norman comes to you for advice. He has just purchased a large amount of inventory with the terms 2/15, n/45. The amount of the invoice is $325,000. He is currently short of cash but has decent credit. He can borrow the money needed to settle the account payable at an annual interest rate of 12 percent. Bill is sure he will have the necessary cash by the due date of the invoice but not by...
Bill Norman comes to you for advice. He has just purchased a large amount of Inventory with the terms 2 20.n/45. The amount of the involce is $330,000. He is currently short of cash but has decent credit He can borrow the money needed to settle the account payable at an annual interest rate of 9 percent Bill is sure he will have the necessary cash by the due date of the invoice but not by the last day of...
Mr. Bill S.Preston purchased a new house for $80,000. He paid $20,000 upfront on the down payment and agreed to pay the rest over the 25 years in 25 equal annual payments that include principal payments plus 7 percent compound interest on the unpaid balance. What will these equal payments be? 2. What is the present value of an annuity of $80 received at the beginning of each year for the next six years? The first payment will be received...
Your best friend consults you for investment advice. You learn that his tax rate is 38%, and he has the following current investments and debts:• A car loan with an outstanding balance of $5,000 and a 4.79 APR (monthly compounding)• Credit cards with an outstanding balance of $10,000 and a 14.94%APR (monthly compounding)• A regular savings account with a $30,000 balance, paying a 5.44% effective annual rate (EAR)• A money market savings account with a $100,000 balance, paying a 5.25% APR (daily compounding)• A tax-deductible home...
23, Refer to Figure 7-1. Based on the figure, a the price level has fallen since 1965 b. the price level in 1985 was low er than in 1980 c. the price level fell from 1980 to 1990 d the price level has not fallen since 1965 e. the base year is 1965 24. Parvez is trying to decide whether or not he should lend $1,000 to li for a year. li would pay a fixed nominal interest rate of...
The credit terms offered to customers for early payment need to be sufficiently lucrative for them to want to pay early, but not so lucrative that the seller is effectively paying an inordinately high interest rate for the use of the money that it is receiving early. The term structure used for credit terms is to first state the number of days you are giving customers from the invoice date in which to take advantage of the early payment credit...
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In its income statement for the year ended December 31,2017, Larkspur, Inc. reported the following condensed data Operating expenses 551,000 Interest revenue Cost of goods Interest expense Income tax expense 35,720 Other comprehensive income (net of $910 tax)6,310 $25,080 12,920 1,672,000 954,560 Loss on disposal of plant assets 53,200 Net sales Prepare an income statement. LARKSPUR, INC. Income Statement For the Year Ended December 31, 2017 Sales 1,672,000 Net Sales Net Sales...
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Paragraph stalled, but first we need to close some apps. Update now 1. All other things equal, how will the following impact the future value: a) increase in the present value, b) decrease in the interest rate, c) increase in the number of time periods. 3 points 2. All other things equal, how will the following impact the present value: a) increase in the...