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Effective Cost of Trade Credit
The D.J. Masson Corporation needs to raise $400,000 for 1 year to supply working capital to a new store. Masson buys from its suppliers on terms of 2/10, net 90, and it currently pays on the 10th day and takes discounts. However, it could forgo discounts, pay on the 90th day, and get the needed $400,000 in the form of costly trade credit. What is the effective annual interest rate of this trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.
Describe concept of future value and present value
Calculate the total finance charge and annual allocation of finance charge
You own a security that provides an annual dividend of $135 forever. The security’s annual return is 5%. What is the present value of this security? Round your answer to the nearest cent.
How do political parties shape election outcomes and the formation of governments? Discuss the similarities and differences in the role of political parties in presidential and parliamentary governments, and discuss the role of parties in plurality a..
Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $570,000 is estimated to result in $240,000 in annual pretax cost savings. The shop’s tax rate is 30 percent and its discount..
The correlation coefficient between stock B and the market portfolio is 0.8. The standard deviation of stock B is 35% and that of the market is 20%. Calculate the beta of the stock.
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $11 per share dividend in 10 years and will..
arter Corporation's sales are expected to increase from $5 million in 2012 to $6 million in 2013, or by 20%. Its assets totalled $3 million at the end of 2012. Carter is at full capacity, so its assets must grow in proportion to projected sales. Why ..
Fama’s Llamas has a weighted average cost of capital of 11 percent. The company’s cost of equity is 13 percent, and its pretax cost of debt is 9 percent. The tax rate is 40 percent. What is the company’s target debt−equity ratio?
Prepare a statement showing the incremental cash flows for this project over an 8-year period and calculate the payback period (P/B) and the net present value (NPV) for the project.
You find a bond with 8 years until maturity that has a coupon rate of 7 percent and a yield to maturity of 7 percent. What is the Macaulay duration?
Metropolis Health System has to do something about their ambulance situation. They have to (1) buy a new ambulance, (2) lease a new one, or (3) renovate an existing ambulance that MHS already owns. How much more information should Rob have before he ..
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