Quantitative Problem: Adams Manufacturing Inc. buys $11.7 million of materials (net of discounts) on terms of 2/10, net
Posted: Fri Jul 01, 2022 7:46 am
Quantitative Problem: Adams ManufacturingInc. buys $11.7 million of materials (net of discounts) on terms of2/10, net 50; and it currently pays after 10 days and takes thediscounts. Adams plans to expand, which will require additionalfinancing. If Adams decides to forgo discounts, how much additionalcredit could it obtain? Assume 365 days in year for yourcalculations. Do not round intermediate calculations. Round youranswer to the nearest cent.$
What would be the nominal and effective cost of such a credit?Assume 365 days in year for your calculations. Do not roundintermediate calculations. Round your answer to two decimalplaces.Nominal cost: %Effective cost: %
If the company could receive the funds from a bank at a rate of8.1%, interest paid monthly, based on a 365-day year, what would bethe effective cost of the bank loan? Do not round intermediatecalculations. Round your answer to two decimal places. %
Should Adams use bank debt or additional trade credit?-Select-
The bank loan should be used
.Additional trade credit should be used.
What would be the nominal and effective cost of such a credit?Assume 365 days in year for your calculations. Do not roundintermediate calculations. Round your answer to two decimalplaces.Nominal cost: %Effective cost: %
If the company could receive the funds from a bank at a rate of8.1%, interest paid monthly, based on a 365-day year, what would bethe effective cost of the bank loan? Do not round intermediatecalculations. Round your answer to two decimal places. %
Should Adams use bank debt or additional trade credit?-Select-
The bank loan should be used
.Additional trade credit should be used.