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Category > Business & Finance Posted 13 Jun 2017 My Price 5.00

Derson Manufacturing wishes to evaluate the credit terms offered by its four biggest

Derson Manufacturing wishes to evaluate the credit terms offered by its four biggest suppliers of raw materials. The prime rate is currently 7.0 percent, and Derson can borrow short-term funds at a spread of 2.5 percent above the prime rate. Assume a 365-day year and that the fi rm always pays its suppliers on the last day allowed by their stated credit terms. The terms offered by each supplier are as follows: Supplier 1: 2/10 net 40 Supplier 2: 1/15 net 60 Supplier 3: 3/10 net 70 Supplier 4: 1/10 net 50

a. Calculate the interest rate associated with not taking the discount from each supplier.

b. Assuming the firm needs short-term financing and considering each supplier separately, indicate whether the firm should take the discount from each supplier.

c. If the firm did not need any short-term financing, when should it pay each of the suppliers?

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Alpha Geek
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Status NEW Posted 13 Jun 2017 07:06 AM My Price 5.00

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file 1497340474-Answer.docx preview (228 words )
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