Effective annual cost of costly trade credit

Assignment Help Financial Management
Reference no: EM13768137

If Rubash Corporation bought on terms of 1/10, net 30, what would be its nominal annual cost of costly trade credit? Assume a 365-day year.

If Rubash were unable to stretch its trade credit and hence had to pay by Day 30 if it did not take discounts, what would be its effective annual cost of costly trade credit? Assume a 365-day year.

If Rubash were able to delay payment until Day 50 rather than pay on Day 30, what would be the new nominal annual cost of its costly trade credit? Assume a 365-day year.

Reference no: EM13768137

Questions Cloud

Internal rate of return equals the required return : Which one of the following will occur when the internal rate of return equals the required return? Explain why?
Discuss the types of challenges that each sector face : Briefly discuss the types of challenges that each sector-both public and private-may face. Are there any legal issues, either criminal or civil, that need to be addressed before privatization can occur
What is the expected capital gains yield : Hooper Printing Inc. has bonds outstanding with 19 years left to maturity. The bonds have an 7% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen ..
What would the effective interest rate be on this loan : Wu Corporation has been offered a loan of $1,000,000 at a rate of 8.5%, simple interest, with monthly interest payments and a 365-day year. What would the effective interest rate be on this loan? If Wu's $1,000,000 loan had been 8.5%, add-on, payable..
Effective annual cost of costly trade credit : If Rubash Corporation bought on terms of 1/10, net 30, what would be its nominal annual cost of costly trade credit? Assume a 365-day year. If Rubash were unable to stretch its trade credit and hence had to pay by Day 30 if it did not take discounts,..
Sales increase : Maggie's Muffins, Inc., generated $2,000,000 in sales during 2013, and its year-end total assets were $1,600,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
What is the expected risk premium on the portfolio : You have decided to invest 30 percent in X; 30 percent in Y; and 40 percent in Z. The probability of the state of the economy is Boom 25%; Normal 60%; and, Bust 15%. The rate of return for stock X is Boom .20; Normal .15; and, Bust .00. The rate of r..
Investment to retrofit work area-review operating procedures : Hiring physically challenged people to clean bowling shoes will save BowlingBackOffice, Inc (BBO) $3,000 per year for the next 5 years but will require a $10,000 investment to retrofit the work area and review operating procedures to ensure that the ..
Permit the holders to purchase one share of stock : Maese Industries had warrants outstanding that permit the holders to purchase one share of stock per warrant at a price of $25. We are to assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1000 par value bon..

Reviews

Write a Review

 

Financial Management Questions & Answers

  University of ballarat general guide

All written work must conform with the University of Ballarat General Guide for the Presentation of Academic Work.

  What proportion of the next payment is interest

A loan is being repaid by 2n level payments, starting one year after the loan. Just after the nth payment the borrower finds that she still owe (3/4) of the original amount. What proportion of the next payment is interest?

  What is the IRR of the investment

A large cow barn will cost $150,000 to build today and you figure it will add $18,000 per year to your after-tax cash flows for the next ten years. If the salvage value of the building is 50% after ten years and the cost of capital is 7%, what is the..

  What is the new exchange rate for the yen

The inflation rate in the U.S. is 3%, while the inflation rate in Japan is 2%. The current exchange rate is $1 equal to 101 Japanese yen. If purchasing power parity condition is existed, what is the new exchange rate for the yen?

  The primary financial goal of a for-profit corporation is

the primary financial goal of a for-profit corporation is to make a profit to maximize shareholder wealth.choosing any

  What is the horizon value

The Granite Paving Company is all-equity financed and has the following free cash flows in years 1-4: $3 million ($3M); $3.7M; $4M; $4.2M. After year 4, the firm is expected to grow at a sustainable rate of 3% per annum. With a WACC of 12%, what is t..

  Find the payment amount for the loan

A loan has monthly payments. The APR is 19%, and interest is compounded 2 times per year. Calculate the effective interest rate that would be needed to find the payment amount for the loan.

  Individual component costs of capital

Compute the cost of capital for the firm for the following-A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.9%. Interest payments are $54.50. The bonds have a current market value of $1,120 and will mature ..

  Statements is correct concerning market efficiency

Which one of the following statements is correct concerning market efficiency?

  Incremental cost of going outside versus conducting survey

Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey ..

  Discuss pros and cons of financing in unhedged eurodollars

Discuss the pros and cons of financing in unhedged Eurodollars instead of via Euro euros. As you do this you must give consideration to the foreign exchange risks associated with financing in Eurodollars.

  Best estimate of the companys cost of equity

Stock in Dragula Industries has a beta of 1.4. The market risk premium is 7 percent, and T-bills are currently yielding 4.40 percent. The company’s most recent dividend was $1.60 per share, and dividends are expected to grow at a 6.0 percent annual r..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd