Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. adams manufacturing inc. buys $11.9 million of mat

Adams Manufacturing Inc. buys $11.9 million of materials (net of discounts) on terms of 2/10, net...

Free

70.2K

Verified Solution

Question

Accounting

Adams Manufacturing Inc. buys $11.9 million of materials (net ofdiscounts) on terms of 2/10, net 50; and it currently pays after 10days and takes the discounts. Adams plans to expand, which willrequire additional financing. If Adams decides to forgo discounts,how much additional credit could it obtain? Assume 365 days in yearfor your calculations. Do not round intermediate calculations.Round your answer 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 of8.2%, 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.
  %

Answer & Explanation Solved by verified expert
3.7 Ratings (662 Votes)

ANSWER:-

Additional credit = 11,900000 * 40 /365

=$1,304,109.58

Nominal cost =(discount rate) / (1-discount rate )) * (365 / (credit period - discount period))

=(0.02/(1-0.02)) * (365 / (50-10))

=18.62%

Effective cost = (1+(discount rate / (1- discount rate)))^ (365 / (credit period - discount period)) -1

=(1+2/98)^(365/40) -1

=20.24%

Effective rate of bank loan =(1+0.082/12)^(12)-1

=8.52%

------------------------------------------------------------

if you have any query please ask me in comment box i am here to helps you don't give direct Thumbs down.if you satisfied my work give Thumbs UP

                                                *******THANK YOU*******
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Statistics
1.2K views

A student is taking a quiz with nine questions. Each question has answers: A, B, C,...

Programming
1.2K views

Using C# Create the “TestQuestion” class. It will have two class variables: 1) a question and 2)...

Psychology
1.2K views

How is the story/myth of Aeneas connected to story/myth of Romulus and Remus?

Advance Math
1.2K views

Use Laplace transforms to solve the following initial value problem : y'' - 3y' +2y = 1...

Calculus
1.2K views

Suppose lim f x 8 and lim g x 6 Find 24 7 24 7...

Accounting
1.2K views

3. (TCOs 1, 8, and 9) Copper Corporation owns stock in Bronze Corporation and has...

Accounting
1.2K views

Puvo, Incorporated, manufactures a single product in which varlable manufocturing overhead is assigned on the...

Accounting
1.2K views

Calculate the annual cash dividends required to be paid for each of the following preferred...

Accounting
1.2K views

Required information Use the following information for the Problems below. (Algo) [The following information applies...

Accounting
1.2K views

Required information [The following information applies to the questions displayed below.] Charles has AGI of...

Finance
1.2K views

Ella has plans to retire at 65, however, she does not know how much she...

Accounting
1.2K views

Need Help in Part 5 ...