A firm faces a liquidity crunch and must decide between borrowing from a bank at 12% interest and stretching its payables for one quarter. If it stretches the payables it will forgo a 2% discount for timely payment. Based solely on cash flows, which would you suggest?
A) use the bank loan; forgoing a cash discount is costly
B) use the bank loan because it represents simple interest
C) stretch the payables and finance at a savings of approximately 3.76% annually
D) stretching saves the firm approximately 8% per year
Ans: C) stretch the payables and finance at a savings of approximately 3.76% annually
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Jose started renting a house to Bill for $600 per month beginning February 1, 2016. Bill paid $1,200 on January 15, 2016, which included one month's rent and one month's security deposit. The rent is due by the 5th of the month. The lease specifies that the security deposit will also be used as the final month's rent. Bill pays the rent on the 2nd of each month. Bill also paid $150 for repairs to the air-conditioning system in July and $80 for a roof repair in September. He deducted the amounts from the rent paid to Jose for those months. Bill was unable to pay December's rent until January of the next year. How much should Jose report as rental income for 2016?
a. $6,600 b. $7,200 c. $6,900 d. $6,000
A good rule of thumb about the discarding of respondents is that such decisions should be made before conducting any analysis
Indicate whether the statement is true or false