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Determine the cost of giving up the cash discount

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Company UX manufactures glassware. Supplier DQ provides raw material to Company UX under the credit terms of 1/15 net 40.

i. Determine the cost of giving up the cash discount from Supplier DQ. Your answer should be in percentage and rounded to two decimal places.

ii. Bank JW offers short-term financing to Company UX at a premium of 5% above PRIME. If the current PRIME rate is 11% p.a; what is the cost of bank borrowing for Company UX?

iii. Given your answers in (i) and (ii), should Company UX take up the cash discount from Supplier DQ? If the invoice amount is $80,000, determine when and how much should Company UX pay.

Reference no: EM132288939

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